Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
ý
Yes
o
No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
o
Yes
ý
No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
ý
Yes
o
No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
ý
Yes
o
No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer
ý

Accelerated filer
o

Non-accelerated filer
o

Smaller reporting company
o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o
Yes
ý
No

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last
sold as of the last business day of the registrant's most recently completed second fiscal quarter (July 2, 2015) was $2,239,112,519 (assuming, for this purpose, that only directors and
officers are deemed affiliates).

There
were 41,554,116 shares of the registrant's common stock issued and outstanding as of January 26, 2016.

DOCUMENTS INCORPORATED BY REFERENCE

Portions
of the Proxy Statement for the registrant's 2015 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

Except for the historical financial information contained herein, the matters discussed in this report on
Form 10-K (as well as documents incorporated herein by reference) may be considered "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include declarations regarding the intent, belief or current expectations of Silicon
Laboratories Inc. and its management and may be signified by the words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" or similar language. You are cautioned
that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those indicated by such
forward-looking statements. Factors that could cause or contribute to such differences include those discussed under "Risk Factors" and elsewhere in this report. Silicon Laboratories disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Silicon Laboratories Inc. is a provider of silicon, software and solutions for the Internet of Things (IoT), Internet
infrastructure, industrial control, consumer and automotive markets. We solve some of the electronics industry's toughest problems, providing customers with significant advantages in performance,
energy savings, connectivity and design simplicity. Backed by our world-class engineering teams with strong software and mixed-signal design expertise, Silicon Laboratories empowers developers with
the tools and technologies they need to advance quickly and easily from initial idea to final product.

The pervasiveness of connectivity and the explosion in mobile computing is driving semiconductor consumption. Intelligence is being
added to electronic systems to enable remote monitoring, power efficiency and an improved user experience. This in turn is increasing the demand for bandwidth, requiring more infrastructure to support
higher performance networks. The nearly ubiquitous availability of Internet access and the increasing intelligence of electronic devices and mobility are enabling what is called the Internet of
Things, a term that describes the exponential increase in IP-enabled devices connected to the Internet.

These
trends require more and more interaction between the analog world we live in and the digital world of computing, and therefore require analog-intensive, mixed-signal circuits.
Traditional mixed-signal designs relied upon solutions built with numerous, complex discrete analog and digital components. While these traditional designs provide the required functionality, they are
often inefficient and inadequate for use in markets where size, cost, power consumption and performance are increasingly important product differentiators. In order to improve their competitive
position, electronics manufacturers need to reduce the cost and complexity of their systems and enable new features or functionality to differentiate themselves from their competitors.

Simultaneously,
these manufacturers face accelerating time-to-market demands and must be able to rapidly adapt to evolving industry standards and new technologies. Because
analog-intensive, mixed-signal design expertise is difficult to find, these manufacturers increasingly are turning to third parties, like us, to provide advanced mixed-signal solutions. Mixed-signal
design requires specific expertise and relies on creative, experienced engineers to deliver solutions that optimize speed, power and performance, despite the noisy digital environment, and within the
constraints of standard manufacturing processes. The development of this design expertise typically requires years of practical analog design experience under the guidance of a senior engineer, and
engineers with the required level of skill and expertise are in short supply.

them
with mixed-signal solutions with greater functionality, smaller size and lower power requirements at a reduced cost and shorter time-to-market.

Products

We provide analog-intensive, mixed-signal solutions for use in a variety of electronic products in a broad range of applications for
the IoT market including connected home, smart lighting, security, wearables and smart energy applications. We are a supplier of wireless connectivity solutions for the IoT based on
Bluetooth®, ZigBee®, Thread, Wi-Fi® and sub-GHz technologies.

We
provide a wide range of timing and isolation products for infrastructure applications including high-performance clocks and oscillators for networking equipment, data centers and
wireless base stations, as well as digital isolators and current sensors for industrial power supplies, motor control, solar inverters and hybrid-electric vehicles. We also provide broadcast products,
such as TV tuners and demodulators and automotive radio tuners, and access products including subscriber line interface circuits for voice over IP (VoIP), embedded modems, and Power over Ethernet
(PoE) power source equipment and powered device ICs.

Our
products integrate complex mixed-signal functions that are frequently performed by numerous discrete components in competing products into a single chip or chipset. By doing so, we
are able to create products that, when compared to many competing products:



Require less printed circuit board (PCB) space;



Reduce the use of external components lowering the system cost and simplifying design;

The
following table summarizes the diverse product areas and applications for the various products that we have introduced to customers:

Product Areas and Description

Applications

Internet of Things Products

Microcontrollers and Wireless Products

We offer a family of products ideal for embedded systems that include energy friendly 8-bit mixed-signal microcontrollers, 32-bit wireless MCUs and ultra
low-power 32-bit MCUs based on scalable ARM® Cortex-M0+/M3/M4 cores, as well as wireless connectivity devices such as our EZRadio® family of fully integrated, low power transceivers. Our wireless modules provide flexible, highly integrated
products that meet demanding requirements and can be used in a number of applications. Our wireless connectivity solutions for the IoT are based on Bluetooth, ZigBee, Thread, Wi-Fi and sub-GHz technologies. Our EFM32, EFM8, 8051, wireless
MCUs and wireless SoCs are supported by Simplicity Studio, a one-click access to design tools, documentation, software and support resources. These products generally integrate intelligent data capture, high performance processing, and
communication interfaces in a single system on a chip. This family of products addresses a variety of end-markets, including the IoT (connected home, smart lighting, security, wearables and smart energy applications), automotive, communications,
consumer, industrial, medical and power management markets.

Our worldwide hybrid TV tuners with analog TV demodulator in a single CMOS IC leverage our proven digital low-IF architecture and exceed the performance
of traditional discrete TV tuners, enabling TV makers to deliver improved picture quality and better reception for both analog and digital broadcasts. Our small, low power and high performance single and dual digital video demodulators support
DVB-T/T2, DVB-S/S2/S2X, DVB-C/C2, and/or ISDB-T in a single chip and are ideal for equipment receiving digital terrestrial, satellite and/or cable services. Our AM and FM receivers deliver a complete radio solution from antenna input to audio output
in a single chip. The broadcast audio products are based on an innovative digital architecture that enables significant improvements in performance, which translates to a better consumer experience, while reducing system cost and board space for our
customers.

Our high-performance solutions for car sound systems include high fidelity radio ICs that improve the end user experience, reduce system cost and take
advantage of the latest digital features. Our scalable architecture enables infotainment system suppliers to leverage their investments across multiple product lines ranging from entry-level car radios to cutting-edge multi-tuner, multi-antenna
radios for premium vehicles.



Automotive infotainment
systems/radios



Navigation/GPS
devices

Infrastructure Products

Timing Devices

Robust demand for bandwidth is driving the deployment of next-generation Internet infrastructure equipment to deliver higher speed, higher capacity and
more flexible networks. This transition puts unique requirements on the clocks and oscillators used to provide timing and synchronization for the equipment responsible for switching, transporting, processing and storing network traffic. To meet this
need, we provide low jitter, frequency flexible, mass customizable timing solutions that accelerate development time, minimize cost and improve system reliability. Our high-performance "clock-tree-on-a-chip" products offer highly integrated
single-chip IC solutions for clock synthesis and jitter attenuation, offering superior jitter performance and frequency flexibility for high data rate applications.

Our ProSLIC provides the analog subscriber line interface on the source end of the telephone which generates dial tone, busy tone, caller ID and ring
signal. Our offerings are well suited for the market for Voice over IP telephony applications deployed over cable, DSL, optical and wireless fixed terminal networks.

Our Power over Ethernet power source equipment and powered device ICs offer highly differentiated solutions with a reduced total bill of materials (BOM)
and improved performance and reliability. Our solutions offer a higher level of integration not available with competing solutions.



Enterprise networking routers and
switches



Wireless access points
(WAP)



VoIP phones



POS terminals



Security cameras

Revenues
during fiscal 2015, 2014 and 2013 were generated predominately by sales of our mixed-signal products. The following summarizes our revenue by product category (in thousands):

Fiscal Year

2015

2014

2013

Internet of Things

$

262,329

$

209,005

$

181,254

Broadcast

161,787

204,256

199,837

Infrastructure

121,974

108,123

100,523

Access

98,736

99,320

98,473

​

​

​

​

​

​

​

​

​

​

​

Revenues

$

644,826

$

620,704

$

580,087

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Customers, Sales and Marketing

We market our products through our direct sales force and through a network of independent sales representatives and distributors.
Direct and distributor customers buy on an individual purchase order basis, rather than pursuant to long-term agreements.

We
consider our customer to be the end customer purchasing either directly from a distributor, a contract manufacturer or us. An end customer purchasing through a contract manufacturer
typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer to the end customer. Although we
actually sell the
products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer.

Two
of our distributors, Edom Technology and Avnet, represented 20% and 12% of our revenues during fiscal 2015, respectively. No other distributor accounted for 10% or more of revenues
for fiscal 2015.

During
fiscal 2015, our ten largest end customers accounted for 29% of our revenues. We had no customer that represented more than 10% of our revenues during this period. Our major
customers include Chamberlain, Cisco, Harman Becker, Huawei, LG Electronics, Samsung, Technicolor, Technisat, Varian Medical Systems and ZTE.

We
maintain numerous sales offices in North America, Europe and Asia. Revenue is attributed to a geographic area based on the shipped-to location. The percentage of our revenues derived
from outside of the United States was 85% in fiscal 2015. For further information regarding our revenues and long-lived assets by geographic area, see Note 18,
Segment
Information
, to the Consolidated Financial Statements.

Our direct sales force is comprised of a number of sales professionals who possess varied levels of responsibility and experience, including directors, country
managers, regional sales managers, district sales managers, strategic account managers, field sales engineers and sales representatives. We also utilize independent sales representatives and
distributors to generate sales of our products. We have relationships with many independent sales representatives and distributors worldwide whom we have selected based on their understanding of the
mixed-signal marketplace and their ability to provide effective field sales applications support for our products.

Our
marketing efforts are targeted at both identified industry leaders and emerging market participants. Direct marketing activities are supplemented by a focused marketing
communications effort that seeks to raise awareness of our company and products. Our public relations efforts are focused on leading trade and business publications. Our external website is used to
deliver corporate and product information. We also pursue targeted advertising in key trade publications and we have a cooperative marketing program that allows our distributors and representatives to
promote our products to their local markets in conjunction with their own advertising activities. Finally, we maintain a presence at strategic trade shows and industry events. These activities, in
combination with direct sales activities, help drive demand for our products.

Due
to the complex and innovative nature of our products, we employ experienced applications engineers who work closely with customers to support the design-win process, and can
significantly accelerate the customer's time to market. A design-win occurs when a customer has designed our ICs into its product architecture and ordered product from us. A considerable amount of
effort to assist the customer in incorporating our ICs into its products is typically required prior to any sale. In many cases, our innovative ICs require significantly different implementations than
existing approaches and, therefore, successful implementations may require extensive communication with potential customers. The amount of time required to achieve a design-win can vary substantially
depending on a customer's development cycle, which can be relatively short (such as three months) or very long (such as two years) based on a wide variety of customer factors. Not all design wins
ultimately result in revenue. However, once a completed design architecture has been implemented and produced in high volumes, our customers are reluctant to significantly alter their designs due to
this extensive design-win process. We believe this process, coupled with our intellectual property protection, promotes relatively longer product life cycles for our products and high barriers to
entry for competitive products, even if such competing products are offered at lower prices. Our close collaboration with our customers provides us with knowledge of derivative product ideas or
completely new product line offerings that may not otherwise arise in other new product discussions.

Research and Development

Through our research and development efforts, we leverage experienced analog and mixed-signal engineering talent and expertise to
create new ICs that integrate functions typically performed inefficiently by multiple discrete components. This integration generally results in lower costs, smaller die sizes, lower power demands and
enhanced price/performance characteristics. We attempt to reuse successful techniques for integration in new applications where similar benefits can be realized. We believe that we have attracted many
of the best engineers in our industry. We believe that reliable and precise analog and mixed-signal ICs can only be developed by teams of engineers who have significant analog experience and are
familiar with the intricacies of designing these ICs for commercial volume production. The development of test methodologies is just one example of a critical activity requiring experience and
know-how to enable the rapid release of a new product for commercial success. We have accumulated a vast set of trade secrets that allow us to pursue innovative approaches to mixed-signal problems
that are difficult for competitors to duplicate. We highly value our engineering talent and strive to maintain a very high bar when bringing new recruits to the company.

Research
and development expenses were $188.1 million, $173.0 million and $157.8 million in fiscal 2015, 2014 and 2013, respectively.

Technology

Our product development process facilitates the design of highly-innovative, analog-intensive, mixed-signal ICs. Our engineers' deep
knowledge of existing and emerging standards and performance requirements helps us to assess the technical feasibility of a particular IC. We target areas where we can provide compelling product
improvements. Once we have solved the primary challenges, our field application engineers continue to work closely with our customers' design teams to maintain and develop an understanding of our
customers' needs, allowing us to formulate derivative products and refined features.

To
fully capitalize on these advantages, we have assembled a world-class development team with exceptional analog and mixed-signal design expertise led by accomplished senior engineers.

Analog and RF Design Expertise in CMOS

We believe that our most significant core competency is world-class analog and RF design capability. Additionally, we strive to design
substantially all of our ICs in standard CMOS processes. While it is often significantly more difficult to design analog ICs in CMOS, CMOS provides multiple benefits versus existing alternatives,
including significantly reduced cost, reduced technology risk and greater worldwide foundry capacity. CMOS is the most commonly used process technology for manufacturing digital ICs and as a result is
most likely to be used for the manufacturing of ICs with finer line geometries. These finer line geometries can enable smaller and faster ICs. By designing our ICs in CMOS, we enable our products to
benefit from this trend towards finer line geometries, which allows us to integrate more digital functionality into our mixed-signal ICs.

Designing
analog and mixed-signal ICs is significantly more complicated than designing stand alone digital ICs. While advanced software tools exist to help automate digital IC design,
there are far fewer tools for advanced analog and mixed-signal IC design. In many cases, our analog circuit design efforts begin at the fundamental transistor level. We believe that we have a
demonstrated ability to design the most difficult analog and RF circuits using standard CMOS technologies.

Digital Signal Processing, Firmware and System Design Expertise

We consider the partitioning of a circuit to be a proprietary and creative design technique. Deep systems knowledge allows us to use
our digital signal processing (DSP) design expertise to maximize the price/performance characteristics of both the analog and digital functions and allow our ICs to work in an optimized manner to
accomplish particular tasks. Generally, we attempt to move analog functions into the digital domain as quickly as possible, creating system efficiencies without compromising performance. These
patented approaches require our advanced DSP and systems
expertise. We then leverage our firmware know-how to change the 'personality' of our devices, optimizing features and

We have the talent and circuit integration methodologies required to combine precision analog, high-speed digital, flash memory and
in-system programmability into a single, monolithic CMOS integrated circuit. Our microcontroller products are designed to capture an external analog signal, convert it to a digital signal, compute
digital functions on the stream of data and then communicate the results through a standard digital interface. The ability to develop standard products with the broadest possible customer application
base while being cost efficient with the silicon area of the monolithic CMOS integrated circuit requires a keen sense of customer value and engineering capabilities. Additionally, to manage the wide
variety of signals on a monolithic piece of silicon including electrical noise, harmonics and other electronic distortions requires a fundamental knowledge of device physics and accumulated design
expertise.

Software Expertise

Our software expertise allows us to develop products for markets where intelligent data capture, high-performance processing and
communication are increasingly important product differentiators. The software we have developed to address these markets enable machine-to-machine communications, providing intelligence to electronic
systems. Our products integrate high-performance, low-power wireless and microcontroller ICs with reliable and scalable software into a flexible and robust networking platform.

The
demand for low-power, small-footprint wireless technology is accelerating as more and more IP-enabled end points are being connected to the Internet of Things (IoT). Our software
enables a broad range of power-sensitive applications for the IoT, including smart energy, home automation, security and other connected products. We believe that the combination of our software and
IC design expertise differentiates us from many of our competitors.

Module Integration and Design Expertise

The market for wireless modules has grown as customers search for solutions that provide turnkey wireless connectivity to their
products. The development of modules is difficult due to stringent requirements, including high levels of integration and programmability, performance, reliability, security and power efficiency. In
addition, designs must meet numerous wireless standards deployed in various environments and serving diverse requirements.

Our
combined expertise in IC design and software allows us to engineer the development of our modules to create a robust, high-performance connection in challenging wireless
environments. We have developed wireless modules based on numerous wireless standards, including Bluetooth, ZigBee, Thread, Wi-Fi and sub-GHz. We believe our demonstrated proficiency in the design of
modules provides our customers with significant advantages.

Understanding of Systems Technology and Trends

Our focused expertise in mixed-signal ICs is the result of the breadth of engineering talent we have assembled with experience working
in analog-intensive CMOS design for a wide variety of

applications.
This expertise, which we consider a competitive advantage, is the foundation of our in-depth understanding of the technology and trends that impact electronic systems and markets. Our
expertise includes:



Isolation, which is critical for existing and emerging industrial applications and telecom networks;



Frequency synthesis, which is core technology for wireless and clocking applications;



Integration, which enables the elimination of discrete components in a system; and

Our
understanding of the role of analog/digital interfaces within electronic systems, standards evolution, and end market drivers enables us to identify product development opportunities
and capitalize on market trends.

Manufacturing

As a fabless semiconductor company, we conduct IC design and development in our facilities and electronically transfer our proprietary
IC designs to third-party
semiconductor fabricators who process silicon wafers to produce the ICs that we design. Our IC designs typically use industry-standard CMOS manufacturing process technology to achieve a level of
performance normally associated with more expensive special-purpose IC fabrication technology. We believe the use of CMOS technology facilitates the rapid production of our ICs within a lower cost
framework. Our IC production employs submicron process geometries which are readily available from leading foundry suppliers worldwide, thus increasing the likelihood that manufacturing capacity will
be available throughout our products' life cycles. We currently partner with Taiwan Semiconductor Manufacturing Co. (TSMC) or TSMC's affiliates and Semiconductor Manufacturing International
Corporation (SMIC) to manufacture the majority of our semiconductor wafers. We believe that our fabless manufacturing model significantly reduces our capital requirements and allows us to focus our
resources on design, development and marketing of our ICs.

Once
the silicon wafers have been produced, they are shipped directly to our third-party assembly subcontractors. The assembled ICs are then moved to the final testing stage. This
operation can be performed by the same contractor that assembled the IC, other third-party test subcontractors or within our internal facilities prior to shipping to our customers. During fiscal 2015,
most of our units shipped were tested by offshore third-party test subcontractors. We expect that our utilization of offshore third-party test subcontractors will remain substantial during fiscal
2016.

Backlog

As of January 2, 2016, our backlog was approximately $136.9 million, compared to approximately $122.4 million as
of January 3, 2015. We include in backlog accepted product purchase orders from customers and worldwide distributor stocking orders. We only include orders with an expected shipping date from
us within six months. Product orders in our backlog are subject to changes in delivery schedules or cancellation at the option of the purchaser typically without penalty. Our backlog may fluctuate
significantly depending upon customer order patterns which may, in turn, vary considerably based on rapidly changing business circumstances. Shipments to distributors are not recognized as revenue
until the products are sold by the distributors. Additionally, our arrangements with distributors typically provide for price protection and stock rotation activities. Accordingly, we do not believe
that our backlog at any time is necessarily representative of actual sales for any succeeding period.

The markets for semiconductors generally, and for analog and mixed-signal ICs in particular, are intensely competitive. We anticipate
that the market for our products will continually evolve and will be subject to rapid technological change. We believe the principal competitive factors in our industry are:



Product size;



Power requirement;



Level of integration;



Customer support;



Product capabilities;



Reputation;



Reliability;



Ability to rapidly introduce new products to
market;



Price;



Intellectual property; and



Performance;



Software.

We
believe that we are competitive with respect to these factors, particularly because our ICs typically are smaller in size, are highly integrated, achieve high performance
specifications at lower price points than competitive products and are manufactured in standard CMOS which generally enables us to supply them on a relatively rapid basis to customers to meet their
product introduction schedules. However, disadvantages we face include our relatively short operating history in certain of our markets
and the need for customers to redesign their products and modify their software to implement our ICs in their products.

Due
to our diversified product portfolio and the numerous markets and applications we serve, we target a relatively large number of competitors. We compete with Analog Devices, Atmel,
Conexant, Cypress, IDT, Intel, Marvell Technology Group, Maxim Integrated Products, MaxLinear, Microchip, Microsemi, Nordic Semiconductor, NXP Semiconductors, Qualcomm, Renesas, STMicroelectronics,
Texas Instruments, Vectron International and others. We expect to face competition in the future from our current competitors, other manufacturers and designers of semiconductors and start-up
semiconductor design companies. Our competitors may also offer bundled solutions offering a more complete product, which may negatively impact our competitive position despite the technical merits or
advantages of our products. In addition, our customers could develop products or technologies internally that would replace their need for our products and would become a source of competition. We
could also face competition from module makers or other systems suppliers that may include mixed-signal components in their products that could eliminate the need for our ICs.

Many
of our competitors and potential competitors have longer operating histories, greater name recognition, access to larger customer bases, complementary product offerings, and
significantly greater financial, sales and marketing, manufacturing, distribution, technical and other resources than us. Current and potential competitors have established or may establish financial
and strategic relationships between themselves or with our existing or potential customers, resellers or other third parties. Accordingly, it is possible that new competitors or alliances among
competitors could emerge and rapidly acquire significant market share.

Intellectual Property

Our future success depends in part upon our proprietary technology. We seek to protect our technology through a combination of patents,
copyrights, trade secrets, trademarks and confidentiality procedures. As of January 2, 2016, we had approximately 1,208 issued or pending United States patents. We also frequently file for
patent protection in a variety of international jurisdictions with respect to the proprietary technology covered by our U.S. patents and patent applications. There can be no assurance that patents
will ever be issued with respect to these applications. Furthermore, it is possible that any patents held by us may be invalidated, circumvented, challenged or licensed to others. In addition, there
can be no assurance that such patents will provide us with competitive advantages or adequately safeguard our proprietary rights. While we continue to file new patent applications with

respect
to our recent developments, existing patents are granted for prescribed time periods and will expire at various times in the future.

We
claim copyright protection for proprietary documentation for our products. We have filed for registration, or are in the process of filing for registration, the visual images of
certain ICs with the U.S. Copyright Office. We have registered the "Silicon Labs" logo and a variety of other product and product family names as trademarks in the United States and selected foreign
jurisdictions. All other trademarks, service marks or trade names appearing in this report are the property of their respective owners. We also attempt to protect our trade secrets and other
proprietary information through agreements with our customers, suppliers, employees and consultants, and through other customary security measures. We intend to protect our rights vigorously, but
there can be no assurance that our efforts will be successful. In addition, the laws of other countries in which our products are sold may not protect our products and intellectual property rights to
the same extent as the laws of the United States.

While
our ability to effectively compete depends in large part on our ability to protect our intellectual property, we believe that our technical expertise and ability to introduce new
products in a timely manner will be an important factor in maintaining our competitive position.

Many
participants in the semiconductor and electronics industries have a significant number of patents and have frequently demonstrated a readiness to commence litigation based on
allegations of patent and other intellectual property infringement. From time to time, third parties may assert infringement claims against us. We may not prevail in any such litigation or may not be
able to license any valid and infringed patents from third parties on commercially reasonable terms, if at all. Litigation, regardless of the outcome, is likely to result in substantial cost and
diversion of our resources, including our management's time. Any such litigation could materially adversely affect us.

As of January 2, 2016, we employed 1,199 people. Our success depends on the continued service of our key technical and senior
management personnel and on our ability to
continue to attract, retain and motivate highly skilled analog and mixed-signal engineers. The competition for such personnel is intense. We have never had a work stoppage and none of our U.S.
employees are represented by a labor organization. We consider our employee relations to be good.

Environmental Regulation

Federal, state and local regulations impose various environmental controls on the storage, use, discharge and disposal of certain
chemicals and gases used in the semiconductor industry. Our compliance with these laws and regulations has not had a material impact on our financial position or results of operations.

Available Information

Our website address is www.silabs.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of
our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). Our website and the
information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

We may not be able to maintain our historical growth and may experience significant period-to-period
fluctuations in our revenues and operating results, which may result in volatility in our stock price

Although we have generally experienced revenue growth in our history, we may not be able to sustain this growth. We may also experience
significant period-to-period fluctuations in our revenues and operating results in the future due to a number of factors, and any such variations may cause our stock price to fluctuate. In some future
period our revenues or operating results may be below the expectations of public market analysts or investors. If this occurs, our stock price may drop, perhaps significantly.

A
number of factors, in addition to those cited in other risk factors applicable to our business, may contribute to fluctuations in our revenues and operating results,
including:



The timing and volume of orders received from our customers;



The timeliness of our new product introductions and the rate at which our new products may cannibalize our older products;



The rate of acceptance of our products by our customers, including the acceptance of new products we may develop for integration in
the products manufactured by such customers, which we refer to as "design wins";



The time lag and realization rate between "design wins" and production orders;



The demand for, and life cycles of, the products incorporating our mixed-signal solutions;



The rate of adoption of mixed-signal products in the markets we target;



Deferrals or reductions of customer orders in anticipation of new products or product enhancements from us or our competitors or other
providers of mixed-signal ICs;



Changes in product mix;



The average selling prices for our products could drop suddenly due to competitive offerings or competitive predatory pricing;



The average selling prices for our products generally decline over time;



Changes in market standards;



Impairment charges related to inventory, equipment or other long-lived assets;



The software used in our products, including software provided by third parties, may not meet the needs of our customers;



Significant legal costs to defend our intellectual property rights or respond to claims against us; and



The rate at which new markets emerge for products we are currently developing or for which our design expertise can be utilized to
develop products for these new markets.

The
markets for consumer electronics, for example, are characterized by rapid fluctuations in demand and seasonality that result in corresponding fluctuations in the demand for our
products that are incorporated in such devices. Additionally, the rate of technology acceptance by our customers results in fluctuating demand for our products as customers are reluctant to
incorporate a new IC into their products until the new IC has achieved market acceptance. Once a new IC achieves market acceptance, demand for the new IC can quickly accelerate to a point and then
level off such that rapid

historical
growth in sales of a product should not be viewed as indicative of continued future growth. In addition, demand can quickly decline for a product when a new IC product is introduced and
receives market acceptance. Due to the various factors mentioned above, the results of any prior quarterly or annual periods should not be relied upon as an indication of our future operating
performance.

If we are unable to develop or acquire new and enhanced products that achieve market acceptance in a
timely manner, our operating results and competitive position could be harmed

Our future success will depend on our ability to develop or acquire new products and product enhancements that achieve market
acceptance in a timely and cost-effective manner. The development of mixed-signal ICs is highly complex, and we have at times experienced delays in completing the development and introduction of new
products and product enhancements.
Successful product development and market acceptance of our products depend on a number of factors, including:



Requirements of customers;



Accurate prediction of market and technical requirements;



Timely completion and introduction of new designs;



Timely qualification and certification of our products for use in our customers' products;



Commercial acceptance and volume production of the products into which our ICs will be incorporated;



Availability of foundry, assembly and test capacity;



Achievement of high manufacturing yields;



Quality, price, performance, power use and size of our products;



Availability, quality, price and performance of competing products and technologies;

Successful development of our relationships with existing and potential customers;



Technology, industry standards or end-user preferences; and



Cooperation of third-party software providers and our semiconductor vendors to support our chips within a system.

We
cannot provide any assurance that products which we recently have developed or may develop in the future will achieve market acceptance. We have introduced to market or are in
development of many products. If our products fail to achieve market acceptance, or if we fail to develop new products on a timely basis that achieve market acceptance, our growth prospects, operating
results and competitive position could be adversely affected. The growth of the Internet of Things (IoT) market is dependent on the adoption of industry standards to permit devices to connect and
communicate with each other. If the industry cannot agree on a common set of standards, then the growth of the IoT market may be slower than expected.

Our research and development efforts are focused on a limited number of new technologies and
products, and any delay in the development, or abandonment, of these technologies or products by industry participants, or their failure to achieve market acceptance, could compromise our competitive
position

Our products serve as components and solutions in electronic devices in various markets. As a result, we have devoted and expect to
continue to devote a large amount of resources to develop products based on new and emerging technologies and standards that will be commercially introduced in the future. Research and development
expense during fiscal 2015 was $188.1 million, or 29.2% of

revenues.
A number of companies are actively involved in the development of these new technologies and standards. Should any of these companies delay or abandon their efforts to develop commercially
available products based on new technologies and standards, our research and development efforts with respect to these technologies and standards likely would have no appreciable value. In addition,
if we do not correctly anticipate new technologies and standards, or if the products that we develop based on these new technologies and standards fail to achieve market acceptance, our competitors
may be better able to address market demand than we would. Furthermore, if markets for these new technologies and standards develop later than we anticipate, or do not develop at all, demand for our
products that are currently in development would suffer, resulting in lower sales of these products than we currently anticipate.

We depend on a limited number of customers for a substantial portion of our revenues, and the loss
of, or a significant reduction in orders from, any key customer could significantly reduce our revenues

The loss of any of our key customers, or a significant reduction in sales to any one of them, would significantly reduce our revenues
and adversely affect our business. During fiscal 2015, our ten largest customers accounted for 29% of our revenues. Some of the markets for our products are dominated by a small number of potential
customers. Therefore, our operating results in the foreseeable future will continue to depend on our ability to sell to these dominant customers, as well as the ability of these customers to sell
products that incorporate our IC products. In the future, these customers may decide not to purchase our products at all, purchase fewer products than they did in the past or alter their purchasing
patterns, particularly because:



We do not have material long-term purchase contracts with our customers;



Substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or
delay product purchase commitments with little or no notice to us and without penalty;



Some of our customers may have efforts underway to actively diversify their vendor base which could reduce purchases of our products;
and



Some of our customers have developed or acquired products that compete directly with products these customers purchase from us, which
could affect our customers' purchasing decisions in the future.

Our
customers regularly evaluate alternative sources of supply in order to diversify their supplier base, which increases their negotiating leverage with us and protects their ability to
secure these components. We believe that any expansion of our customers' supplier bases could have an adverse effect on the prices we are able to charge and volume of product that we are able to sell
to our customers, which would negatively affect our revenues and operating results.

Significant litigation over intellectual property in our industry may cause us to become involved in
costly and lengthy litigation which could seriously harm our business

In recent years, there has been significant litigation in the United States involving patents and other intellectual property rights.
From time to time, we receive letters from various industry participants alleging infringement of patents, trademarks or misappropriation of trade secrets or from customers or suppliers requesting
indemnification for claims brought against them by third parties. The exploratory nature of these inquiries has become relatively common in the semiconductor industry. We respond when we deem
appropriate and as advised by legal counsel. We have been involved in litigation to protect our intellectual property rights in the past and may become involved in such litigation again in the future.
We are currently involved in litigation with Cresta
Technology in which we and certain of our customers have been accused of patent infringement related to our television tuner

products.
In the future, we may become involved in additional litigation to defend allegations of infringement asserted by others, both directly and indirectly as a result of certain industry-standard
indemnities we may offer to our customers or suppliers. Legal proceedings could subject us to significant liability for damages or invalidate our proprietary rights. Legal proceedings initiated by us
to protect our intellectual property rights could also result in counterclaims or countersuits against us. Any litigation, regardless of its outcome, would likely be time-consuming and expensive to
resolve and would divert our management's time and attention. Intellectual property litigation also could force us to take specific actions,
including:



Cease selling or manufacturing products that use the challenged intellectual property;



Obtain from the owner of the infringed intellectual property a right to a license to sell or use the relevant technology, which
license may not be available on reasonable terms, or at all;



Redesign those products that use infringing intellectual property; or



Pursue legal remedies with third parties to enforce our indemnification rights, which may not adequately protect our interests.

Any acquisitions we make could disrupt our business and harm our financial condition

As part of our growth and product diversification strategy, we continue to evaluate opportunities to acquire other businesses,
intellectual property or technologies that would complement our current offerings, expand the breadth of our markets or enhance our technical capabilities. The acquisitions that we have made and may
make in the future entail a number of risks that could materially and adversely affect our business and operating results, including:



Problems integrating the acquired operations, technologies or products with our existing business and products;



Diversion of management's time and attention from our core business;



Need for financial resources above our planned investment levels;



Difficulties in retaining business relationships with suppliers and customers of the acquired company;



Risks associated with entering markets in which we lack prior experience;



Risks associated with the transfer of licenses of intellectual property;



Increased operating costs due to acquired overhead;



Tax issues associated with acquisitions;



Acquisition-related disputes, including disputes over earn-outs and escrows;



Potential loss of key employees of the acquired company; and



Potential impairment of related goodwill and intangible assets.

In
contrast to the ICs that we have historically developed, our acquisition of Bluegiga and Telegesis will entail additional efforts to develop modules, which are products that
incorporate ICs as well as additional software. We have limited experience with developing modules. Modules tend to have higher average selling prices but lower overall gross margins than ICs.
Bluegiga's modules currently incorporate products from some of our competitors. Any disruption in supply of those products would adversely affect our business.

Future
acquisitions also could cause us to incur debt or contingent liabilities or cause us to issue equity securities that could negatively impact the ownership percentages of existing
shareholders.

We may be unable to protect our intellectual property, which would negatively affect our ability to
compete

Our products rely on our proprietary technology, and we expect that future technological advances made by us will be critical to
sustain market acceptance of our products. Therefore, we believe that the protection of our intellectual property rights is and will continue to be important to the success of our business. We rely on
a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements
with our employees, consultants, intellectual property providers and business partners, and control access to and distribution of our documentation and other proprietary information. Despite these
efforts, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. Monitoring unauthorized use of our technology is difficult, and we cannot be certain that the
steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot
be certain that patents will be issued as a result of our pending applications nor can we be certain that any issued patents would protect or benefit us or give us adequate protection from competing
products. For example, issued patents may be circumvented or challenged
and declared invalid or unenforceable. We also cannot be certain that others will not develop effective competing technologies on their own.

The future growth of our business will depend in large part on our ability to manage our relationships with current and future
distributors and sales representatives, develop additional channels for the distribution and sale of our products and manage these relationships. During fiscal 2015, 67% of our revenue was derived
from distributors. As we execute our indirect sales strategy, we must manage the potential conflicts that may arise with our direct sales efforts. For example, conflicts with a distributor may arise
when a customer begins purchasing directly from us rather than through the distributor. The inability to successfully execute or manage a multi-channel sales strategy could impede our future growth.
In addition, relationships with our distributors often involve the use of price protection and inventory return rights. This often requires a significant amount of sales management's time and system
resources to manage properly.

We are subject to increased inventory risks and costs because we build our products based on
forecasts provided by customers before receiving purchase orders for the products

In order to ensure availability of our products for some of our largest customers, we start the manufacturing of our products in
advance of receiving purchase orders based on forecasts provided by these customers. However, these forecasts do not represent binding purchase commitments and we do not recognize sales for these
products until they are shipped to the customer. As a result, we incur inventory and manufacturing costs in advance of anticipated sales. Because demand for our products may not materialize,
manufacturing based on forecasts subjects us to increased risks of high inventory carrying costs, increased obsolescence and increased operating costs. These inventory risks are exacerbated when our
customers purchase indirectly through contract manufacturers or hold component inventory levels greater than their consumption rate because this causes us to have less visibility regarding the
accumulated levels of inventory for such customers. A resulting write-off of unusable or excess inventories would adversely affect our operating results.

Our products are complex and may contain errors which could lead to liability, an increase in our
costs and/or a reduction in our revenues

Our products are complex and may contain errors, particularly when first introduced or as new versions are released. Our products are
increasingly being designed in more
complex processes, include higher levels of software and hardware integration in modules and system-level solutions and/or include

elements
provided by third parties which further increase the risk of errors. Many of our products focus on wireless connectivity and the IoT market and such connectivity may make these products
particularly susceptible to cyber-attacks. We rely primarily on our in-house testing personnel to design test operations and procedures to detect any errors or vulnerabilities prior to delivery of our
products to our customers.

Should
problems occur in the operation or performance of our products, we may experience delays in meeting key introduction dates or scheduled delivery dates to our customers. These
errors also could cause us to incur significant re-engineering costs, divert the attention of our engineering personnel from our product development efforts and cause significant customer relations
and business reputation problems. Any defects could result in refunds or other liability or require product replacement or recall. Any of the foregoing could impose substantial costs and harm our
business.

Product
liability, data breach or cyber liability claims may be asserted with respect to our products. Our products are typically sold at prices that are significantly lower than the
cost of the end-products into which they are incorporated. A defect or failure in our product could cause failure in our customer's end-product, so we could face claims for damages that are
disproportionately higher than the revenues and profits we receive from the products involved. Furthermore, product liability risks are particularly significant with respect to medical and automotive
applications because of the risk of serious harm to users of these products. There can be no assurance that any insurance we maintain will sufficiently protect us from any such claims.

We rely on third parties to manufacture, assemble and test our products and the failure to
successfully manage our relationships with our manufacturers and subcontractors would negatively impact our ability to sell our products

We do not have our own wafer fab manufacturing facilities. Therefore, we rely on third-party vendors to manufacture the products we
design. We also currently rely on Asian third-party assembly subcontractors to assemble and package the silicon chips provided by the wafers for use in final products. Additionally, we rely on these
offshore subcontractors for a substantial portion of the testing requirements of our products prior to shipping. We expect utilization of third-party subcontractors to continue in the future.

The
cyclical nature of the semiconductor industry drives wide fluctuations in available capacity at third-party vendors. On occasion, we have been unable to adequately respond to
unexpected increases in customer demand due to capacity constraints and, therefore, were unable to benefit from this incremental demand. We may be unable to obtain adequate foundry, assembly or test
capacity from our third-party subcontractors to meet our customers' delivery requirements even if we adequately forecast customer demand.

There
are significant risks associated with relying on these third-party foundries and subcontractors, including:



Failure by us, our customers or their end customers to qualify a selected supplier;

We
typically do not have long-term supply contracts with our third-party vendors which obligate the vendor to perform services and supply products to us for a specific period, in
specific quantities, and at specific prices. Our third-party foundry, assembly and test subcontractors typically do not guarantee that adequate capacity will be available to us within the time
required to meet demand for our products. In the event that these vendors fail to meet our demand for whatever reason, we expect that it would take up to 12 months to transition performance of
these services to new providers. Such a transition may also require qualification of the new providers by our customers or their end customers.

Most
of the silicon wafers for the products that we sold during fiscal 2015 were manufactured either by Taiwan Semiconductor Manufacturing Co. (TSMC) or TSMC's affiliates or by
Semiconductor Manufacturing International Corporation (SMIC). Our customers typically complete their own qualification process. If we fail to properly balance customer demand across the existing
semiconductor fabrication facilities that we utilize or are required by our foundry partners to increase, or otherwise change the number of fab lines that we utilize for our production, we might not
be able to fulfill demand for our products and may need to divert our engineering resources away from new product development initiatives to support the fab line transition, which would adversely
affect our operating results.

We
monitor the financial condition of our third-party foundries and subcontractor partners. In August 2014, we received notice that Telefunken Semiconductors GmbH & Co
(TSG), a wafer supplier for our high-voltage products, filed an insolvency proceeding in Germany. To mitigate any potential impact on our customers, we purchased a number of additional wafers from TSG
and we expedited our previously-planned transition of the manufacturing of certain high-voltage products to another of our foundry partners. TSG ceased production at the end of February 2015.

Should
unexpected demand exceed our inventory reserves and our transition plans take longer than expected to qualify our replacement products, we may experience a short term decline in
revenue or a longer term decline in revenue if our customers shift their demand to alternative suppliers. Either of these conditions would adversely affect our operating results.

Our customers require our products to undergo a lengthy and expensive qualification process without
any assurance of product sales

Prior to purchasing our products, our customers require that our products undergo an extensive qualification process, which involves
testing of the products in the customer's system as well as rigorous reliability testing. This qualification process may continue for six months or longer. However, qualification of a product by a
customer does not ensure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision to the product or software, changes
in the IC's manufacturing process or the selection of a new supplier by us may require a new qualification process, which may result in delays and in us holding excess or obsolete inventory. After our
products are qualified, it can take an additional six months or more before the customer commences volume production of components or devices that incorporate our products. Despite these
uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, toward qualifying our products with customers in anticipation of sales. If we
are unsuccessful or delayed in qualifying any of our products with a customer, such failure or delay would preclude or delay sales of such product to the customer, which may impede our growth and
cause our business to suffer.

We have substantial international activities, which subjects us to additional business risks
including logistical and financial complexity, political instability and currency fluctuations

We have established international subsidiaries and have opened offices in international markets to support our activities in Europe and
Asia. This has included the establishment of a headquarters in

Singapore
for non-U.S. operations. The percentage of our revenues derived from outside of the United States was 85% during fiscal 2015. We may not be able to maintain or increase international market
demand for our products. Our international operations are subject to a number of risks, including:



Complexity and costs of managing international operations and related tax obligations, including our headquarters for non-U.S.
operations in Singapore;



Protectionist laws and business practices that favor local competition in some countries;



Difficulties related to the protection of our intellectual property rights in some countries;



Multiple, conflicting and changing tax and other laws and regulations that may impact both our international and domestic tax and
other liabilities and result in increased complexity and costs;

High levels of distributor inventory subject to price protection and rights of return to us;



Political and economic instability;



Greater difficulty in hiring and retaining qualified technical sales and applications engineers and administrative personnel; and



The need to have business and operations systems that can meet the needs of our international business and operating structure.

To
date, substantially all of our sales to international customers and purchases of components from international suppliers have been denominated in U.S. dollars. As a result, an
increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive for our international customers to purchase, thus rendering our products less
competitive. Similarly, a decrease in the value of the U.S. dollar could reduce our buying power with respect to international suppliers.

Our products incorporate technology licensed from third parties

We incorporate technology (including software) licensed from third parties in our products. We could be subjected to claims of
infringement regardless of our lack of involvement in the development of the licensed technology. Although a third-party licensor is typically obligated to indemnify us if the licensed technology
infringes on another party's intellectual property rights, such indemnification is typically limited in amount and may be worthless if the licensor becomes insolvent. See
Significant litigation over intellectual property in
our industry may cause us to become involved in costly and lengthy litigation which could seriously harm our
business.
Furthermore, any failure of third-party technology to perform properly would adversely affect sales of our products incorporating such technology.

Our inability to manage growth could materially and adversely affect our business

Our past growth has placed, and any future growth of our operations will continue to place, a significant strain on our management
personnel, systems and resources. We anticipate that we will need to implement a variety of new and upgraded sales, operational and financial enterprise-wide systems, information technology
infrastructure, procedures and controls, including the improvement of our accounting and other internal management systems to manage this growth and maintain compliance with regulatory guidelines,
including Sarbanes-Oxley Act requirements. To the extent our business grows, our internal management systems and processes will need to improve to ensure that we remain in compliance. We also expect
that we will need to continue to expand, train, manage and motivate our workforce. All of these endeavors will require substantial management effort, and we anticipate that we will require additional
management personnel and internal processes to manage these efforts and to

plan
for the succession from time to time of certain persons who have been key management and technical personnel. If we are unable to effectively manage our expanding global operations, including our
international headquarters in Singapore, our business could be materially and adversely affected.

We are subject to risks relating to product concentration

We derive a substantial portion of our revenues from a limited number of products, and we expect these products to continue to account
for a large percentage of our revenues in the near term. Continued market acceptance of these products, is therefore, critical to our future success. In addition, substantially all of our products
that we have sold include technology related to one or more of our issued U.S. patents. If these patents are found to be invalid or unenforceable, our competitors could introduce competitive products
that could reduce both the volume and price per unit of our products. Our business, operating results, financial condition and cash flows could therefore be adversely affected
by:



A decline in demand for any of our more significant products;



Failure of our products to achieve continued market acceptance;



Competitive products;



New technological standards or changes to existing standards that we are unable to address with our products;



A failure to release new products or enhanced versions of our existing products on a timely basis; and



The failure of our new products to achieve market acceptance.

We are subject to credit risks related to our accounts receivable

We do not generally obtain letters of credit or other security for payment from customers, distributors or contract manufacturers.
Accordingly, we are not protected against accounts receivable default or bankruptcy by these entities. Our ten largest customers or distributors represent a substantial majority of our accounts
receivable. If any such customer or distributor, or a material portion of our smaller customers or distributors, were to become insolvent or otherwise not satisfy their obligations to us, we could be
materially harmed.

We depend on our key personnel to manage our business effectively in a rapidly changing market, and
if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed

We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, engineering,
sales and marketing personnel. We believe that our future success will be dependent on retaining the services of our key personnel, developing their successors and certain internal processes to reduce
our reliance on specific individuals, and on properly managing the transition of key roles when they occur. There is currently a shortage of qualified personnel with significant experience in the
design, development, manufacturing, marketing and sales of analog and mixed-signal products. In particular, there is a shortage of engineers who are familiar with the intricacies of the design and
manufacturability of analog elements, and competition for such personnel is intense. Our key technical personnel represent a significant asset and serve as the primary source for our technological and
product innovations. We may not be successful in attracting and retaining sufficient numbers of technical personnel to support our anticipated growth. The loss of any of our key employees or the
inability to attract or retain qualified personnel both in the United States and

Introduction of technologies or product enhancements that reduce the need for our products;



The loss of, or decrease in sales to, one or more key customers;



A large sale of stock by a significant shareholder;



Dilution from the issuance of our stock in connection with acquisitions;



The addition or removal of our stock to or from a stock index fund;



Departures of key personnel; and



The required expensing of stock awards.

The
stock market has experienced extreme volatility that often has been unrelated to the performance of particular companies. These market fluctuations may cause our stock price to fall
regardless of our performance.

Most of our current manufacturers, assemblers, test service providers, distributors and customers
are concentrated in the same geographic region, which increases the risk that a natural disaster, epidemic, labor strike, war or political unrest could disrupt our operations or sales

Most of our foundries and several of our assembly and test subcontractors' sites are located in Taiwan and most of our other foundry,
assembly and test subcontractors are located in the Pacific Rim region. In addition, many of our customers are located in the Pacific Rim region. The risk of earthquakes in Taiwan and the Pacific Rim
region is significant due to the proximity of major earthquake fault lines in the area. Earthquakes, tsunamis, fire, flooding, lack of water or other natural disasters, an epidemic, political unrest,
war, labor strikes or work stoppages in countries where our semiconductor manufacturers, assemblers and test subcontractors are located, likely would result in the disruption of our foundry, assembly
or test capacity. There can be no assurance that alternate capacity could be obtained on favorable terms, if at all.

A
natural disaster, epidemic, labor strike, war or political unrest where our customers' facilities are located would likely reduce our sales to such customers. North Korea's
geopolitical maneuverings have created unrest. Such unrest could create economic uncertainty or instability, could escalate to war or otherwise adversely affect South Korea and our South Korean
customers and reduce our sales to such customers, which would materially and adversely affect our operating results. In addition, a significant portion of the assembly and testing of our products
occurs in South Korea. Any disruption resulting from these events could also cause significant delays in shipments of our products until we are able to shift our manufacturing, assembling or testing
from the affected subcontractor to another third-party vendor.

The semiconductor manufacturing process is highly complex and, from time to time, manufacturing
yields may fall below our expectations, which could result in our inability to satisfy demand for our products in a timely manner and may decrease our gross margins due to higher unit costs

The manufacturing of our products is a highly complex and technologically demanding process. Although we work closely with our
foundries and assemblers to minimize the likelihood of reduced manufacturing yields, we have from time to time experienced lower than anticipated manufacturing yields. Changes in manufacturing
processes or the inadvertent use of defective or contaminated materials could result in lower than anticipated manufacturing yields or unacceptable performance deficiencies, which could lower our
gross margins. If our foundries fail to deliver fabricated silicon wafers of satisfactory quality in a timely manner, we will be unable to meet our customers' demand for our products in a timely
manner, which would adversely affect our operating results and damage our customer relationships. Additionally, we have utilized microelectromechanical systems (MEMS) in certain of our timing products
rather than the pure CMOS manufacturing process that we have traditionally utilized. We have less operating history with MEMS IC design and MEMS IC manufacturing processes and have encountered lower
yields and reduced manufacturing capacity.

We depend on our customers to support our products, and some of our customers offer competing
products

We rely on our customers to provide hardware, software, intellectual property indemnification and other technical support for the
products supplied by our customers. If our customers do not provide the required functionality or if our customers do not provide satisfactory support for their products, the demand for these devices
that incorporate our products may diminish or we may otherwise be materially adversely affected. Any reduction in the demand for these devices would significantly reduce our revenues.

In
certain products, some of our customers offer their own competitive products. These customers may find it advantageous to support their own offerings in the marketplace in lieu of
promoting our products.

We believe we have the ability to service our debt under our credit facilities, but our ability to make the required payments
thereunder when due depends upon our future performance, which will be subject to general economic conditions, industry cycles and other factors affecting our operations, including risk factors
described under this Item 1A, many of which are beyond our control. Our credit facilities also contain covenants, including financial covenants. If we breach any of the covenants under our
credit facilities and do not obtain appropriate waivers, then, subject to any applicable cure periods, our outstanding indebtedness thereunder could be declared immediately due and payable.

We could seek to raise additional debt or equity capital in the future, but additional capital may
not be available on terms acceptable to us, or at all

We believe that our existing cash, cash equivalents, investments and credit under our credit facilities will be sufficient to meet our
working capital needs, capital expenditures, investment requirements and commitments for at least the next 12 months. However, our ability to borrow further under the credit facilities is
dependent upon our ability to satisfy various conditions, covenants and representations. It is possible that we may need to raise additional funds to finance our activities or to facilitate
acquisitions of other businesses, products, intellectual property or technologies. We believe we could raise these funds, if needed, by selling equity or debt securities to the public or to selected
investors. In addition, even though we may not need additional funds, we may still elect to sell additional equity or debt securities or obtain credit facilities for other reasons. However, we may not
be able to obtain additional funds on favorable terms, or at all. If we decide to raise additional funds by issuing equity or convertible debt securities, the ownership percentages of existing
shareholders would be reduced.

We are a relatively small company with limited resources compared to some of our current and
potential competitors and we may not be able to compete effectively and increase market share

Some of our current and potential competitors have longer operating histories, significantly greater resources and name recognition and
a larger base of customers than we have. As a result, these competitors may have greater credibility with our existing and potential customers. They also may be able to adopt more aggressive pricing
policies and devote greater resources to the development, promotion and sale of their products than we can to ours. In addition, some of our current and potential competitors have already established
supplier or joint development relationships with the decision makers at our current or potential customers. These competitors may be able to leverage their existing relationships to discourage their
customers from purchasing products from us or persuade them to replace our products with their products. Our competitors may also offer bundled solutions offering a more complete product despite the
technical merits or advantages of our products. These competitors may elect not to support our products which could complicate our sales efforts. These and other competitive pressures may prevent us
from competing successfully against current or future competitors, and may materially harm our business. Competition could decrease our prices, reduce our sales, lower our gross margins and/or
decrease our market share.

Provisions in our charter documents and Delaware law could prevent, delay or impede a change in
control of us and may reduce the market price of our common stock

Provisions of our certificate of incorporation and bylaws could have the effect of discouraging, delaying or preventing a merger or
acquisition that a stockholder may consider favorable. For example, our certificate of incorporation and bylaws provide for:



The division of our Board of Directors into three classes to be elected on a staggered basis, one class each year;

The ability of our Board of Directors to issue shares of our preferred stock in one or more series without further authorization of
our stockholders;



A prohibition on stockholder action by written consent;



Elimination of the right of stockholders to call a special meeting of stockholders;



A requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to
be considered at any meeting of stockholders; and



A requirement that a supermajority vote be obtained to amend or repeal certain provisions of our certificate of incorporation.

We
also are subject to the anti-takeover laws of Delaware which may discourage, delay or prevent someone from acquiring or merging with us, which may adversely affect the market price of
our common stock.

Risks related to our industry

We are subject to the cyclical nature of the semiconductor industry, which has been subject to
significant fluctuations

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product
obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often connected
with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies' and their customers' products and fluctuations in general economic conditions.
Deteriorating general worldwide economic conditions, including reduced economic activity, concerns about credit and inflation, increased energy costs, decreased consumer confidence, reduced corporate
profits, decreased spending and similar adverse business conditions, would make it very difficult for our customers, our vendors, and us to accurately forecast and plan future business activities and
could cause U.S. and foreign businesses to slow spending on our products. We cannot predict the timing, strength, or duration of any economic slowdown or economic recovery. If the economy or markets
in which we operate deteriorate, our business, financial condition, and results of operations would likely be materially and adversely affected.

Downturns
have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. In the recent past, we
believe the semiconductor industry suffered a downturn due in large part to adverse conditions in the global credit and financial markets, including diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increased unemployment rates and general uncertainty regarding the economy. Such downturns may have a material adverse effect on our
business and operating results.

Upturns
have been characterized by increased product demand and production capacity constraints created by increased competition for access to third-party foundry, assembly and test
capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party foundry, assembly or test subcontractors have provided
assurances that adequate capacity will be available to us.

The average selling prices of our products could decrease rapidly which may negatively impact our
revenues and gross margins

We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling
prices. We have reduced the average unit price of our products in anticipation of or in response to competitive pricing pressures, new product introductions by us or our

competitors
and other factors. If we are unable to offset any such reductions in our average selling prices by increasing our sales volumes, increasing our sales content per application or reducing
production costs, our gross margins and revenues will suffer. To maintain our gross margin percentage, we will need to develop and introduce new products and product enhancements on a timely basis and
continually reduce our costs. Our failure to do so could cause our revenues and gross margin percentage to decline.

Competition within the numerous markets we target may reduce sales of our products and reduce our
market share

The markets for semiconductors in general, and for mixed-signal products in particular, are intensely competitive. We expect that the
market for our products will continually evolve and will be subject to rapid technological change. In addition, as we target and supply products to numerous markets and applications, we face
competition from a relatively large number of competitors. We compete with Analog Devices, Atmel, Conexant, Cypress, IDT, Intel, Marvell Technology Group, Maxim Integrated Products, MaxLinear,
Microchip, Microsemi, Nordic Semiconductor, NXP Semiconductors, Qualcomm, Renesas, STMicroelectronics, Texas Instruments, Vectron International and others. We expect to face competition in the future
from our current competitors, other manufacturers and designers of semiconductors, and start-up semiconductor design companies. As the markets for communications products grow, we also may face
competition from traditional communications device companies. These companies may enter the mixed-signal semiconductor market by introducing their own products or by entering into strategic
relationships with or acquiring other existing providers of semiconductor products. In addition, large companies may restructure their operations to create separate companies or may acquire new
businesses that are focused on providing the types of products we produce or acquire our customers.

We may be subject to information technology failures that could damage our reputation, business
operations and financial condition

We rely on information technology for the effective operation of our business. Our systems are subject to damage or interruption from a
number of potential sources, including natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, theft, physical or electronic
break-ins, cyber-attacks, sabotage, vandalism, or similar events or disruptions. Our security measures may not detect or prevent such security breaches. Any such compromise of our information security
could result in the theft or unauthorized publication or use of our confidential business or proprietary information, result in the unauthorized release of customer, supplier or employee data, result
in a violation of privacy or other laws, expose us to a risk of litigation or damage our reputation. In addition, our inability to use or access information systems at critical points in time could
unfavorably impact the timely and efficient operation of our business, which could negatively affect our business and operating results.

Third
parties with which we conduct business, such as foundries, assembly and test contractors, distributors and customers, have access to certain portions of our sensitive data. In the
event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our reputation, business operations and financial results.

Our products must conform to industry standards and technology in order to be accepted by end users
in our markets

Generally, our products comprise only a part of a device. All components of such devices must uniformly comply with industry standards
in order to operate efficiently together. We depend on companies that provide other components of the devices to support prevailing industry standards. Many of these companies are significantly larger
and more influential in affecting industry standards than we

are.
Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companies do not
support the same industry standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected which would harm our business.

Products
for certain applications are based on industry standards that are continually evolving. Our ability to compete in the future will depend on our ability to identify and ensure
compliance with these evolving industry standards. The emergence of new industry standards could render our products incompatible with products developed by other suppliers. As a result, we could be
required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with
prevailing industry standards for a significant period of time, we could miss opportunities to achieve crucial design wins.

Our
pursuit of necessary technological advances may require substantial time and expense. We may not be successful in developing or using new technologies or in developing new products
or product enhancements that achieve market acceptance. If our products fail to achieve market acceptance, our growth prospects, operating results and competitive position could be adversely affected.

Customer demands and new regulations related to conflict-free minerals may adversely affect us

The Dodd-Frank Wall Street Reform and Consumer Protection Act imposes new disclosure requirements regarding the use of "conflict"
minerals mined from the Democratic Republic of Congo and adjoining countries in products, whether or not these products are
manufactured by third parties. These new requirements could affect the pricing, sourcing and availability of minerals used in the manufacture of semiconductor devices (including our products). There
will be additional costs associated with complying with the disclosure requirements, such as costs related to determining the source of any conflict minerals used in our products. Our supply chain is
complex and we may be unable to verify the origins for all metals used in our products. We may also encounter challenges with our customers and stockholders if we are unable to certify that our
products are conflict free.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate headquarters, housing engineering, sales and marketing, administration and test operations, is located in Austin, Texas.
Our headquarters facilities consist of two buildings, which we purchased in 2012, that are located on land which we have leased through 2099. The buildings contain approximately 441,000 square feet of
floor space, of which approximately 130,000 square feet were leased to other tenants. In addition to these properties, we lease smaller facilities in various locations in the United States, Brazil,
Canada, China, Finland, France, Germany, Hungary, India, Italy, Japan, Norway, Singapore, South Korea, Taiwan and the United Kingdom for engineering, sales and marketing, administrative and
manufacturing support activities. We believe that these facilities are suitable and adequate to meet our current operating needs.

in
the District of Delaware, alleging infringement of three United States Patents (the "Cresta Patents"). The Delaware District Court action has been stayed.

On
January 28, 2014, Cresta Technology also filed a complaint with the United States International Trade Commission ("ITC") alleging infringement of the same patents. During the
course of the proceedings, Cresta Technology withdrew its allegations as to one of the three Cresta Patents. On September 29, 2015, the ITC issued its Final Determination, finding that all the
patent claims asserted against our products were either invalid or not infringed and that Cresta Technology failed to establish the ITC's domestic industry requirement. The ITC found no violation by
us and terminated the investigation. On November 30, 2015, Cresta Technology filed an appeal of the ITC decision to the Federal Circuit, which is now pending.

In
a parallel process, we challenged the validity of the claims of the Cresta Patents asserted in the ITC investigation through a series of Inter-Parties Review (IPR) proceedings at the
Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO). On October 21, 2015, the USPTO issued final written decisions on a first set of reviewed claims
finding all of the reviewed claims invalid. On December 18, 2015, Cresta Technology filed notices of appeal to the United States Court of Appeals for the Federal Circuit as to this first USPTO
determination. The USPTO has instituted a second set of IPR proceedings against a second set of the remaining claims.

On
May 6, 2014, we filed a complaint with the ITC alleging infringement of United States Patent Nos. 6,137,372 and 6,233,441 against Cresta Technology, Hauppauge
Digital, Inc., Hauppague Computer Works, Inc., PCTV Systems, S.a.r.l., Luxembourg and PCTV Systems S.a.r.l., seeking to prevent the importation and sale of allegedly infringing products
in the United States. On July 1, 2014, the Administrative Law Judge accepted a consent order whereby Cresta Technology will not sell for importation, import or sell in the United States
television tuners that infringe our United States Patent Nos. 6,137,372 and 6,233,441. Accordingly, this ITC investigation has been terminated in its entirety.

On
July 16, 2014, we filed a lawsuit against Cresta Technology in the United States District Court in the Northern District of California alleging infringement of United States
Patent Nos. 6,308,055, 6,304,146, 6,137,372, 6,233,441, 6,965,761 and 7,353,011. We are seeking a permanent injunction stopping the sale of all allegedly infringing Cresta Technology products
and an award of damages and attorney fees. This lawsuit is currently scheduled for trial in March 2016.

As
is customary in the semiconductor industry, we provide indemnification protection to our customers for intellectual property claims related to our products. We have not accrued any
material liability on our consolidated balance sheet related to such indemnification obligations in connection with the Cresta Technology litigation.

We
intend to continue to vigorously defend against Cresta Technology's allegations. At this time, we cannot predict the outcome of these matters or the resulting financial impact to us,
if any.

Other

We are involved in various other legal proceedings that have arisen in the normal course of business. While the ultimate results of
these matters cannot be predicted with certainty, we do not expect them to have a material adverse effect on our consolidated financial statements.

Our registration statement (Registration No. 333-94853) under the Securities Act of 1933, as amended, relating to our initial
public offering of our common stock became effective on March 23, 2000. Our common stock is quoted on the NASDAQ National Market (NASDAQ) under the symbol "SLAB". The table below shows the high
and low per-share sales prices of our common stock for the periods indicated, as reported by NASDAQ. As of January 26, 2016, there were 90 holders of record of our common stock.

High

Low

Fiscal Year 2014

First Quarter

$

54.00

$

41.19

Second Quarter

53.78

42.41

Third Quarter

50.05

39.28

Fourth Quarter

48.50

36.29

Fiscal Year 2015

First Quarter

$

52.83

$

42.61

Second Quarter

58.54

49.85

Third Quarter

53.84

39.33

Fourth Quarter

54.72

42.06

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we do not intend to pay cash dividends in the foreseeable
future. We currently expect to retain any future earnings to fund the operation and expansion of our business.

The graph depicted below shows a comparison of cumulative total stockholder returns for an investment in Silicon
Laboratories Inc. common stock, the NASDAQ Composite Index and the PHLX Semiconductor Index.

Company / Index

01/01/11

12/31/11

12/29/12

12/28/13

01/03/15

01/02/16

Silicon Laboratories Inc.

$

100.00

$

94.35

$

90.16

$

92.03

$

103.24

$

105.48

NASDAQ Composite

$

100.00

$

99.17

$

114.20

$

162.41

$

186.93

$

200.31

PHLX Semiconductor Index

$

100.00

$

89.70

$

94.37

$

135.11

$

178.12

$

175.32

(1)

The
graph assumes that $100 was invested in our common stock and in each index at the market close on January 1, 2011, and that all dividends were
reinvested. No cash dividends have been declared on our common stock.

(2)

Stockholder
returns over the indicated period should not be considered indicative of future stockholder returns.

Issuer Purchases of Equity Securities

The following table summarizes repurchases of our common stock during the three months ended January 2, 2016 (in thousands,
except per share amounts):

Period

Total Number
of Shares
Purchased

Average Price
Paid per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs

The program that was originally announced in October 2014 to repurchase up to $100 million of our common stock expired as scheduled in December 2015. In
August 2015, the Board of Directors authorized a program to repurchase up to $100 million of our common stock through December 2016. The program allows for repurchases to be made in the open
market or in private transactions, including structured or accelerated transactions, subject to applicable legal requirements and market conditions.

Item 6. Selected Financial Data

Please read this selected consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our Consolidated Financial Statements and the notes to those statements included in this Form 10-K.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the "Cautionary Statement" and "Risk
Factors" above for discussions of the uncertainties, risks and assumptions associated with these statements. Our fiscal year-end financial reporting periods are a 52-or 53-week year ending on the
Saturday closest to December 31st. Fiscal 2015 was a 52-week year and ended on January 2, 2016. Fiscal 2014 was a 53-week year with the extra week occurring in the fourth quarter of the
year and ended on January 3, 2015. Fiscal 2013 was a 52-week year and ended on December 28, 2013.

Overview

We are a provider of silicon, software and solutions for the Internet of Things (IoT), Internet infrastructure, industrial control,
consumer and automotive markets. We solve some of the electronics industry's toughest problems, providing customers with significant advantages in performance, energy savings, connectivity and design
simplicity. Mixed-signal integrated circuits (ICs) are electronic components that convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can
process. Therefore, mixed-signal ICs are critical components in products addressing a variety of markets, including industrial, communications, consumer and automotive. Our major customers include
Chamberlain, Cisco, Harman Becker, Huawei, LG Electronics, Samsung, Technicolor, Technisat, Varian Medical Systems and ZTE.

As
a fabless semiconductor company, we rely on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, to manufacture the silicon wafers that
reflect our IC designs. Each wafer contains numerous die, which are cut from the wafer to create a chip for an IC. We rely on third parties in Asia to assemble, package, and, in most cases, test these
devices and ship these units to our customers. Testing performed by such third parties facilitates faster delivery of
products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower costs and increased flexibility of test capacity.

Our
expertise in analog-intensive, high-performance, mixed-signal ICs enables us to develop highly differentiated solutions that address multiple markets. We group our products into the
following categories:

Broadcast products, which include our broadcast consumer and automotive products;



Infrastructure products, which include our timing products (clocks and oscillators), and isolation devices; and



Access products, which include our Voice over IP (VoIP) products, embedded modems and our Power over Ethernet (PoE) devices.

We
previously grouped IoT products and Infrastructure products under the Broad-based products heading.

Through
acquisitions and internal development efforts, we have continued to diversify our product portfolio and introduce new products and solutions with added functionality and further
integration. In fiscal 2015, we acquired Bluegiga Technologies Oy and Telegesis (UK) Limited. Bluegiga is a provider of Bluetooth Smart, Bluetooth Classic and Wi-Fi modules and software stacks for a
multitude of applications in the IoT, industrial automation, consumer electronics, automotive, retail, residential, and health and fitness markets. Telegesis is a supplier of wireless mesh networking
modules based on our

In
fiscal 2015, we introduced two new EFM32 Gecko MCU families that provide advancements in security and energy management technologies; the TouchXpress family of
fixed-function controllers, which speeds development of capacitive sensing applications; a new EFM8 MCU family that delivers high analog performance and peripheral integration in the 8-bit market;
comprehensive reference designs that reduce time to market and simplify the development of ZigBee-based home automation, connected lighting and smart gateway products; a new family of multi-channel
digital isolators featuring a high-voltage isolation barrier designed to withstand 10 kV surge hits; a new family of subscriber line interface circuits (SLICs) offering low power consumption, small
footprint, and high levels of integration and programmability for the VoIP gateway market; a comprehensive reference design solution that streamlines the development of voice-enabled ZigBee remote
controls; a sixth-generation version of the iWRAP Bluetooth software stack for the Bluetooth 3.0 wireless audio accessory market; an isolated current sense amplifier delivering high
bandwidth and low signal delay; a fully integrated, pre-certified Blue Gecko wireless module providing a plug-and-play solution for Bluetooth Smart connectivity; a low-jitter, small-footprint and
low-power network synchronizer clock; a new release of the Simplicity Studio development platform featuring an enhanced real-time Energy Profiler tool; the release of the Thread protocol stack
providing IP-based mesh networking technology for the Connected Home market; a highly integrated clock IC for wireless infrastructure applications including base stations; a dual-mode Bluetooth module
solution that supports both Bluetooth Smart and Bluetooth Classic wireless technologies; energy-friendly USB-enabled MCUs for power-sensitive IoT applications; a complete Wireless M-Bus platform
solution for wirelessly connected smart meters in the European market; high-speed, multi-channel digital isolators targeting industrial applications; a digital audio bridge chip and evaluation kit
designed to simplify the development of accessories for iOS devices; a portfolio of receivers/audio processors and multi-standard digital radio ICs for the global car radio market; a family of
high-performance digital set-top box tuner ICs designed to reduce system cost and power consumption; the Blue Gecko product portfolio featuring Bluetooth Smart modules and wireless SoC devices for a
wide range of wireless IoT designs; the next generation of Simplicity Studio enabling concurrent MCU and RF design; next-generation 8-bit MCUs designed for ultra-low-power, small-footprint IoT
applications; 32-bit sub-GHz wireless MCUs designed to simplify a wide range of IoT connectivity applications; and high-precision temperature sensors offering exceptional power efficiency. We plan to
continue to introduce products that increase the content we provide for existing applications, thereby enabling us to serve markets we do not currently address and expand our total available market
opportunity.

During
fiscal 2015, we had no customer that represented more than 10% of our revenues. During fiscal 2014 and 2013, we had one customer, Samsung, whose purchases across a variety of
product areas represented 12% and 15% of our revenues, respectively. In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and
contract manufacturers. An end customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products with other
components for sale by such contract manufacturer to the end customer. Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end
customer as our customer. Two of our distributors, Edom Technology and Avnet, represented 20% and 12% of our
revenues during fiscal 2015, 20% and 12% of our revenues during fiscal 2014, and 21% and 11% of our revenues during fiscal 2013, respectively. There were no other distributors or contract
manufacturers that accounted for more than 10% of our revenues in fiscal 2015, 2014 or 2013.

The
percentage of our revenues derived from outside of the United States was 85% in fiscal 2015, 86% in fiscal 2014 and 88% in fiscal 2013. Substantially all of our revenues to date have
been

denominated
in U.S. dollars. We believe that a majority of our revenues will continue to be derived from customers outside of the United States.

The
sales cycle for our ICs can be as long as 12 months or more. An additional three to six months or more are usually required before a customer ships a significant volume of
devices that incorporate our ICs. Due to this lengthy sales cycle, we typically experience a significant delay between incurring research and development and selling, general and administrative
expenses, and the corresponding sales. Consequently, if sales in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our operating results for
that quarter and, potentially, future quarters would be adversely affected. Moreover, the amount of time between initial research and development and commercialization of a product, if ever, can be
substantially longer than the sales cycle for the product. Accordingly, if we incur substantial research and development costs without developing a commercially successful product, our operating
results, as well as our growth prospects, could be adversely affected.

Because
many of our ICs are designed for use in consumer products such as televisions, set-top boxes, radios and wearables, we expect that the demand for our products will be typically
subject to some degree of seasonal demand. However, rapid changes in our markets and across our product areas make it difficult for us to accurately estimate the impact of seasonal factors on our
business.

Results of Operations

The following describes the line items set forth in our Consolidated Statements of Income:

Revenues.
Revenues are generated predominately by sales of our products. We recognize revenue on sales when all of the following
criteria are met:
1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable, and 4) collectibility is
reasonably assured. Generally, we recognize revenue from product sales to direct customers and contract manufacturers upon shipment. Certain of our sales are made to distributors under agreements
allowing certain rights of return and price protection on products unsold by distributors. Accordingly, we defer the revenue and cost of revenue on such sales until the distributors sell the product
to the end customer. A small portion of our revenues is derived from the sale of patents. The above revenue recognition criteria for patent sales are generally met upon the execution of the patent
sale agreement. Our products typically carry a one-year replacement warranty. Replacements have been insignificant to date.

Our
revenues are subject to variation from period to period due to the volume of shipments made within a period, the mix of products we sell and the prices we charge for our products.
The vast majority of our revenues were negotiated at prices that reflect a discount from the list prices for our products. These discounts are made for a variety of reasons, including: 1) to
establish a relationship with a new customer, 2) as an incentive for customers to purchase products in larger volumes, 3) to provide profit margin to our distributors who resell our
products or 4) in response to competition. In addition, as a product matures, we expect that the average selling price for such product will decline due to the greater availability of competing
products. Our ability to increase revenues in the future is dependent on increased demand for our established products and our ability to ship larger volumes of those products in response to such
demand, as well as our ability to develop or acquire new products and subsequently achieve customer acceptance of newly introduced products.

Cost of Revenues.
Cost of revenues includes the cost of purchasing finished silicon wafers processed by independent foundries; costs
associated with
assembly, test and shipping of those products; costs of personnel and equipment associated with manufacturing support, logistics and quality assurance; costs of software royalties, other intellectual
property license costs and certain acquired intangible assets; and an allocated portion of our occupancy costs.

Research and Development.
Research and development expense consists primarily of personnel-related expenses, including stock-based
compensation, as
well as new product masks, external consulting and services costs, equipment tooling, equipment depreciation, amortization of intangible assets, and an allocated portion of our occupancy costs.
Research and development activities include the design of
new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

Selling, General and Administrative.
Selling, general and administrative expense consists primarily of personnel-related expenses,
including
stock-based compensation, as well as an allocated portion of our occupancy costs, sales commissions to independent sales representatives, applications engineering support, professional fees, legal
fees and promotional and marketing expenses.

Other Income (Expense), Net.
Other income (expense), net consists primarily of foreign currency remeasurement adjustments as well as
other
non-operating income and expenses.

Provision for Income Taxes.
Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates
adjusted for
non-deductible expenses, research and development tax credits and other permanent differences.

The
following table sets forth our Consolidated Statements of Income data as a percentage of revenues for the periods indicated:

Increased revenues of $53.3 million for our Internet of Things products, due primarily to market share gains for our products,
increases in the market and the addition of revenues from acquisitions.



Decreased revenues of $42.5 million for Broadcast products, due primarily to decreases in our market share and the market for
our consumer products and the sale of patents for $7.1 million in the fiscal 2014. The decrease in Broadcast revenues was offset by increased revenues for our automotive products due to
increases in market share.



Increased revenues of $13.9 million for our Infrastructure products, due primarily to market share gains.



Decreased revenues of $0.6 million for our Access products.

Unit
volumes of our products increased by 3.4% and average selling prices increased by 1.7% compared to fiscal 2014. The average selling prices of our products may fluctuate
significantly from period to period. In general, as our products become more mature, we expect to experience decreases in average selling prices. We anticipate that newly announced, higher priced,
next generation products and product derivatives will offset some of these decreases.

Gross Margin

Fiscal Year

(in millions)

2015

2014

Change

Gross margin

$

380.8

$

378.6

$

2.2

Percent of revenue

59.1

%

61.0

%

(1.9

)%

The
increased dollar amount of gross margin in fiscal 2015 was due to increases in gross margin of $18.8 million for our Internet of Things products, $8.1 million for our
Infrastructure products and $0.6 million for our Access products, offset by a decrease in gross margin of $25.3 million for our Broadcast products. Gross margin in fiscal 2015 included
$2.6 million in acquisition-related charges for the fair value write-up associated with inventory acquired from Bluegiga and Telegesis. Gross margin in fiscal 2014 included $7.1 million
from the sale of patents, which had no associated cost of revenues.

We
may experience declines in the average selling prices of certain of our products. This creates downward pressure on gross margin as a percentage of revenues and may be offset to the
extent we are able to: 1) introduce higher margin new products and gain market share with our products; 2) reduce costs of existing products through improved design; 3) achieve
lower production costs from our wafer suppliers and third-party assembly and test subcontractors; 4) achieve lower production costs per unit as a result of improved yields throughout the
manufacturing process; or 5) reduce logistics costs.

The
increase in research and development expense in fiscal 2015 was principally due to increases of (a) $9.7 million for personnel-related expenses, including costs
associated with increased headcount, and (b) $6.7 million for the amortization of intangible assets. We expect that research and development expense will increase in absolute dollars in
the first quarter of 2016.

Recent
development projects include two new EFM32 Gecko MCU families that provide advancements in security and energy management technologies; the TouchXpress family of fixed-function
controllers, which speeds development of capacitive sensing applications; a new EFM8 MCU family that delivers high analog performance and peripheral integration in the 8-bit market; comprehensive
reference designs that reduce time to market and simplify the development of ZigBee-based home automation, connected lighting and smart gateway products; a new family of multi-channel digital
isolators featuring a high-voltage isolation barrier designed to withstand 10 kV surge hits; a new family of SLICs offering low power consumption, small footprint, and high levels of integration and
programmability for the VoIP gateway market; a comprehensive reference design solution that streamlines the development of voice-enabled ZigBee remote controls; a sixth-generation version of the iWRAP
Bluetooth software stack for the Bluetooth 3.0 wireless audio accessory market; an isolated current sense amplifier delivering high bandwidth and low signal delay; a fully integrated, pre-certified
Blue Gecko wireless module providing a plug-and-play solution for Bluetooth Smart connectivity; a low-jitter, small-footprint and low-power network synchronizer clock; a new release of the Simplicity
Studio development platform featuring an enhanced real-time Energy Profiler tool; the release of the Thread protocol stack providing IP-based mesh networking technology for the Connected Home market;
a highly integrated clock IC for wireless infrastructure applications including base stations; a dual-mode Bluetooth module solution that supports both Bluetooth Smart and Bluetooth Classic wireless
technologies; energy-friendly USB-enabled MCUs for power-sensitive IoT applications; a complete Wireless M-Bus
platform solution for wirelessly connected smart meters in the European market; high-speed, multi-channel digital isolators targeting industrial applications; a digital audio bridge chip and
evaluation kit designed to simplify the development of accessories for iOS devices; a portfolio of receivers/audio processors and multi-standard digital radio ICs for the global car radio market; a
family of high-performance digital set-top box tuner ICs designed to reduce system cost and power consumption; the Blue Gecko product portfolio featuring Bluetooth Smart modules and wireless SoC
devices for a wide range of wireless IoT designs; the next generation of Simplicity Studio enabling concurrent MCU and RF design; next-generation 8-bit MCUs designed for ultra-low-power,
small-footprint IoT applications; 32-bit sub-GHz wireless MCUs designed to simplify a wide range of IoT connectivity applications; and high-precision temperature sensors offering exceptional power
efficiency.

Selling, General and Administrative

Fiscal Year

%
Change

(in millions)

2015

2014

Change

Selling, general and administrative

$

160.5

$

154.1

$

6.4

4.1

%

Percent of revenue

24.9

%

24.8

%

The
increase in selling, general and administrative expense in fiscal 2015 was principally due to increases of (a) $10.8 million for personnel-related expenses, including
costs associated with increased headcount, (b) $1.9 million for the amortization of intangible assets, (c) $1.6 million for acquisition-

related
costs, and (d) $1.0 million for product marketing costs. The increase in selling, general and administrative expense was offset in part by decreases of
(a) $6.3 million for legal fees, primarily related to litigation, and (b) $5.2 million for adjustments to the fair value of acquisition-related contingent consideration. We
expect that selling, general and administrative expense will increase in absolute dollars in the first quarter of 2016.

Interest Income

Interest income in fiscal 2015 was $0.7 million compared to $1.0 million in fiscal 2014.

Interest Expense

Interest expense in fiscal 2015 was $2.8 million compared $3.2 million in fiscal 2014.

Other Income (Expense), Net

Other income (expense), net in fiscal 2015 was $0.1 million compared to $(0.2) million in fiscal 2014.

Provision for Income Taxes

Fiscal Year

(in millions)

2015

2014

Change

Provision for income taxes

$

0.7

$

11.0

$

(10.3

)

Effective tax rate

2.2

%

22.5

%

The
effective tax rate for fiscal 2015 decreased from fiscal 2014, primarily due to the completion of payments related to a prior year intercompany licensing arrangement resulting in an
increase to the foreign tax rate benefit as well as the recognition of a net benefit resulting from a change in the tax accounting treatment of stock-based compensation in a cost-sharing arrangement
following a recent U.S. Tax Court case (Altera). See Note 17,
Income Taxes
, for additional information.

The
decrease in the effective tax rate from the completion of payments related to a prior year intercompany licensing arrangement and the recognition of a net benefit from the Altera
case, was partially offset by an increase in the prior year valuation allowance related to lower expectations of profitability in jurisdictions where tax attributes exist. Additionally, the Company
expects a lower realization of the recently re-enacted U.S. federal research and development tax credit as compared to the realization of the U.S. federal research and development tax credit in the
prior year.

The
effective tax rates for each of the periods presented differ from the federal statutory rate of 35% due to the amount of income earned in foreign jurisdictions where the tax rate may
be lower than the federal statutory rate and other permanent items including nondeductible compensation expenses and research and development tax credits.

Increased revenues of $27.7 million for our Internet of Things products, due primarily to market share gains for our MCU,
wireless and sensor products, including products acquired from Energy Micro in July 2013. Internet of Things revenue growth was offset in part by a decline in revenue for our touch controller products
due to our exit from this market.



Increased revenues of $4.5 million for Broadcast, due primarily to an increase in market share for our automotive products and
the sale of patents of $7.1 million. The increase in Broadcast revenues was offset by decreased revenues for our consumer products due to declines in market share.



Increased revenues of $7.6 million for our Infrastructure products, due primarily to market share gains.

Unit
volumes of our products increased by 5.2% and average selling prices increased by 0.7% compared to fiscal 2013.

Gross Margin

Fiscal Year

(in millions)

2014

2013

Change

Gross margin

$

378.6

$

352.9

$

25.7

Percent of revenue

61.0

%

60.8

%

0.2

%

The
increased dollar amount of gross margin in fiscal 2014 was due to increases in gross margin of $18.0 million for our Internet of Things products, $7.4 million for our
Infrastructure products and $2.2 million for our Broadcast products, offset by a decrease in gross margin of $1.9 million for our Access products. Fiscal 2014 includes gross margin from
the sale of patents of $7.1 million, which had no associated cost of revenues.

Research and Development

Fiscal Year

%
Change

(in millions)

2014

2013

Change

Research and development

$

173.0

$

157.8

$

15.2

9.6

%

Percent of revenue

27.9

%

27.2

%

The
increase in research and development expense in fiscal 2014 was principally due to increases of (a) $11.0 million for personnel-related expenses, including personnel
costs associated with (i) increased headcount, and (ii) the acquisition of Energy Micro, and (b) $2.9 million for the amortization of intangible assets primarily related to
our acquisition of Energy Micro.

The
increase in selling, general and administrative expense in fiscal 2014 was principally due to increases of (a) $11.0 million for adjustments to the fair value of
acquisition-related contingent consideration, (b) $7.5 million for legal fees, primarily related to litigation, and (c) $7.5 million for personnel-related expenses,
primarily associated with (i) increased headcount, and (ii) the acquisition of Energy Micro. The increase in selling, general and administrative expense in fiscal 2014 was offset in part
by acquisition-related costs of $1.5 million in fiscal 2013.

Interest Income

Interest income in fiscal 2014 was $1.0 million compared to $0.9 million in fiscal 2013.

Interest Expense

Interest expense in fiscal 2014 was $3.2 million compared $3.3 million in fiscal 2013.

Other Income (Expense), Net

Other income (expense), net in fiscal 2014 was $(0.2) million compared to $0.2 million in fiscal 2013.

Provision for Income Taxes

Fiscal Year

(in millions)

2014

2013

Change

Provision for income taxes

$

11.0

$

12.2

$

(1.2

)

Effective tax rate

22.5

%

19.7

%

The
effective tax rate for fiscal 2014 increased from fiscal 2013, primarily due to the recognition of the fiscal 2012 federal research and development tax credit in fiscal 2013 due to
the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013, as well as a decrease in the foreign tax rate benefit in fiscal 2014. This increase in the effective tax rate was
partially offset by the reduction to a valuation allowance recorded in a prior year related to certain state loss and research and development tax credit carryforwards and the release in fiscal 2014
of prior year unrecognized tax benefits due to the lapse of the statute of limitations applicable to a tax deduction claimed on a prior year foreign tax return.

The
effective tax rates for each of the periods presented differ from the federal statutory rate of 35% due to the amount of income earned in foreign jurisdictions where the tax rate may
be lower than the federal statutory rate, research and development tax credits and other permanent items including changes to the liability for unrecognized tax benefits.

Business Outlook

We expect revenues in the first quarter of fiscal 2016 to be in the range of $157 to $162 million. Furthermore, we expect our
diluted earnings (loss) per share to be in the range of $(0.08) to $(0.02).

Our principal sources of liquidity as of January 2, 2016 consisted of $243.0 million in cash, cash equivalents and
short-term investments, of which approximately $164.5 million was held by our U.S. entities. The remaining balance was held by our foreign subsidiaries. Our cash equivalents and short-term
investments consisted of municipal bonds, money market funds, commercial paper, certificates of deposit, variable-rate demand notes, U.S. government agency, international government bonds and
corporate bonds.

Our
long-term investments consisted of auction-rate securities. In fiscal 2008, auctions for many of our auction-rate securities failed because sell orders exceeded buy orders. As of
January 2, 2016, we held $8.0 million par value auction-rate securities, all of which have experienced failed auctions. These securities have contractual maturity dates ranging from 2033
to 2046. We are receiving the underlying cash flows on all of our auction-rate securities. The principal amounts associated with failed auctions
are not expected to be accessible until a successful auction occurs, the issuer redeems the security, a buyer is found outside of the auction process or the underlying securities mature. We are unable
to predict if these funds will become available before their maturity dates. We do not expect to need access to the capital represented by any of our auction-rate securities prior to their maturities.

Operating Activities

Net cash provided by operating activities was $105.4 million during fiscal 2015, compared to net cash provided of
$137.4 million during fiscal 2014. Operating cash flows during fiscal 2015 reflect our net income of $29.6 million, adjustments of $80.2 million for depreciation, amortization,
stock-based compensation and deferred income taxes, and a net cash outflow of $4.4 million due to changes in our operating assets and liabilities.

Net
cash provided by operating activities was $137.4 million during fiscal 2014, compared to net cash provided of $120.2 million during fiscal 2013. Operating cash flows
during fiscal 2014 reflect our net income of $38.0 million, adjustments of $72.4 million for depreciation, amortization, stock-based compensation and deferred income taxes, and a net
cash inflow of $27.0 million due to changes in our operating assets and liabilities.

Accounts
receivable increased to $73.6 million at January 2, 2016 from $70.4 million at January 3, 2015. The increase in accounts receivable resulted
primarily from normal variations in the timing of collections and billings. Our average days sales outstanding (DSO) was 41 days at January 2, 2016 and 39 days at
January 3, 2015.

Inventory
increased to $53.9 million at January 2, 2016 from $52.6 million at January 3, 2015. Our inventory level is primarily impacted by our need to make
purchase commitments to support forecasted demand and variations between forecasted and actual demand. Our average days of inventory (DOI) was 73 days at January 2, 2016 and
January 3, 2015.

Investing Activities

Net cash used in investing activities was $49.3 million during fiscal 2015, compared to net cash used of $26.3 million
during fiscal 2014. The increase in cash outflows was principally due to $96.1 million in net payments for the acquisition of businesses, including $76.1 million
for the purchase of Bluegiga and Telegesis and $20.0 million for consideration previously withheld in connection with our purchase of Energy Micro, offset by an increase of $74.0 million
from net proceeds from the sales and maturities of marketable securities. See Note 9,
Acquisitions
, for additional information.

Net
cash used in investing activities was $26.3 million during fiscal 2014, compared to net cash used of $105.9 million during fiscal 2013. The decrease in cash outflows
was principally due to a net

payment
of $86.4 million for the acquisition of Energy Micro during fiscal 2013, offset by a decrease of $6.5 million of net proceeds from sales and maturities of marketable securities.

We
anticipate capital expenditures of approximately $14 to $16 million for fiscal 2016. Additionally, as part of our growth strategy, we expect to evaluate opportunities to invest
in or acquire other businesses, intellectual property or technologies that would complement or expand our current offerings, expand the breadth of our markets or enhance our technical capabilities.

Financing Activities

Net cash used in financing activities was $83.8 million during fiscal 2015, compared to net cash used of $65.2 million
during fiscal 2014. The increase in cash outflows was principally due to an increase of $87.2 million in payments on debt and a decrease of $10.2 million from proceeds from the issuance
of common stock, net of cash paid for withheld taxes, offset by net proceeds of $81.2 million from the issuance of long-term debt. In July 2015, we amended our Credit Agreement. In August 2015,
the Board of Directors authorized a program to repurchase up to $100 million of our common stock through December 2016.

Net
cash used in financing activities was $65.2 million during fiscal 2014, compared to net cash used of $23.9 million during fiscal 2013. The increase in cash outflows was
principally due to an increase of $45.7 million for repurchases of our common stock.

Debt

On July 31, 2012, we entered into a $230 million five-year Credit Agreement (the "Credit Agreement"), which consisted of
a $100 million Term Loan Facility and a $130 million Revolving Credit Facility (collectively, the "Credit Facilities"). On July 24, 2015, we amended the Credit Agreement (the
"Amended Credit Agreement") in order to, among other things, increase the borrowing capacity under the Revolving Credit Facility to $300 million, eliminate the Term Loan Facility and extend the
maturity date to five years from the closing date. On July 24, 2015, we borrowed $82.5 million under the Amended Credit Agreement and paid off the remaining balance of our Term Loan
Facility.

The
Amended Credit Agreement includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. We also have an option to increase the size of the
borrowing capacity by up to an aggregate of $200 million in additional commitments, subject to certain conditions.

The
Revolving Credit Facility, other than swingline loans, will bear interest at the Eurodollar rate plus an applicable margin or, at our option, a base rate (defined as the highest of
the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Eurodollar Base Rate plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable
margin for base rate loans. The applicable margins for the Eurodollar rate loans range from 1.25% to 2.00% and for base rate loans range from 0.25% to 1.00%, depending in each case, on the leverage
ratio as defined in the Agreement.

The
Amended Credit Agreement contains various conditions, covenants and representations with which we must be in compliance in order to borrow funds and to avoid an event of default,
including financial covenants that we must maintain a leverage ratio (funded debt/EBITDA) of no more than 3.00 to 1 and a minimum fixed charge coverage ratio (EBITDA/interest payments, income taxes
and capital expenditures) of no less than 1.25 to 1. As of January 2, 2016, we were in compliance with all covenants of the Amended Credit Agreement. Our obligations under the Amended Credit
Agreement are secured by a security interest in substantially all of our assets.

We
have entered into an interest rate swap agreement as a hedge against the Eurodollar portion of the variable interest payments under the Credit Facilities and effectively converted the
Eurodollar

portion
of the interest on the Credit Facilities to a fixed interest rate through July 2017. See Note 5,
Derivative Financial Instruments
, to the
Consolidated Financial Statements for additional information.

Our
future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development
projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our existing cash, cash equivalents, investments and credit under our
Credit Facilities are sufficient to meet our capital requirements through at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that
time. We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing.

Contractual Obligations

The following table summarizes our contractual obligations as of January 2, 2016 (in thousands):

Payments due by period

Total

2016

2017

2018

2019

2020

Thereafter

Long-term debt obligations (1)

$

77,500

$



$



$



$



$

77,500

$



Interest on long-term debt obligations (2)

12,573

2,230

2,453

3,013

3,074

1,803



Operating lease obligations (3)

21,415

5,438

4,394

2,917

1,812

1,514

5,340

Purchase obligations (4)

32,735

32,735











Other long-term obligations (5)

10,707



2,942

4,117

3,648





(1)

Long-term
debt obligations represent the principal portion of our Credit Facilities and include amounts classified as current portion of long-term debt.

(2)

Interest
on our long-term debt obligations is based on the Eurodollar Base Rate plus an applicable margin. We have entered into an interest rate swap
agreement as a hedge against the Eurodollar portion of such variable interest payments and effectively converted the Eurodollar portion of the interest on the Credit Facilities to a fixed interest
rate through July 2017. As of January 2, 2016, the combined interest rate on the Credit Facilities and the interest rate swap was 2.264%. The impact of the interest rate swap was factored into
the calculation of the future interest payments on our long-term debt obligations through July 2017.

(3)

Operating
lease obligations include amounts for leased facilities.

(4)

Purchase
obligations include contractual arrangements in the form of purchase orders with suppliers where there is a fixed non-cancelable payment schedule
or minimum payments due with a reduced delivery schedule.

(5)

Other
long-term obligations represent estimated contingent consideration payments due in connection with the acquisition of Energy Micro and software
license obligations.

We
are unable to make a reasonably reliable estimate as to when or if cash settlement with taxing authorities will occur for our unrecognized tax benefits. Therefore, our liability of
$3.6 million for unrecognized tax benefits is not included in the table above. See Note 17,
Income Taxes,
to the Consolidated Financial
Statements for additional information.

Off-Balance Sheet Arrangements

As of January 2, 2016, we had no significant off-balance sheet arrangements.

The preparation of financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles
requires that we make estimates and assumptions that affect the amounts reported. Changes in facts and circumstances could have a significant impact on the resulting estimated amounts included in the
financial statements. We believe the following critical accounting policies affect our more complex judgments and estimates. We also
have other policies that we consider to be key accounting policies, such as our policies for revenue recognition, including the deferral of revenues and cost of revenues on sales to distributors;
however, these policies do not meet the definition of critical accounting estimates because they do not generally require us to make estimates or judgments that are difficult or subjective.

Inventory valuation
We assess the recoverability of inventories through the application of a set of methods, assumptions and estimates. In determining
net realizable value, we write down inventory that may be slow moving or have some form of obsolescence, including inventory that has aged more than 12 months. We also adjust the valuation of
inventory when its manufacturing cost exceeds the estimated market value less selling costs. We assess the potential for any unusual customer returns based on known quality or business issues and
write-off inventory losses for scrap or non-saleable material. Inventory not otherwise identified to be written down is compared to an assessment of our 12-month forecasted demand. The result of this
methodology is compared against the product life cycle and competitive situations in the marketplace to determine the appropriateness of the resulting inventory levels. Demand for our products may
fluctuate significantly over time, and actual demand and market conditions may be more or less favorable than those that we project. In the event that actual demand is lower or market conditions are
worse than originally projected, additional inventory write-downs may be required.

Stock-based compensation
We recognize the fair-value of stock-based compensation transactions in the Consolidated Statements of Income. The fair value
of our full-value stock awards (with the exception of market-based performance awards) equals the fair market value of our stock on the date of grant. The fair value of our market-based performance
awards is estimated at the date of grant using a Monte-Carlo simulation. The fair value of our stock option and employee stock purchase plan grants is estimated at the date of grant using the
Black-Scholes option pricing model. In addition, we are required to estimate the expected forfeiture rate of our stock grants and only recognize the expense for those shares expected to vest. If our
actual experience differs significantly from the assumptions used to compute our stock-based compensation cost, or if different assumptions had been used, we may have recorded too much or too little
stock-based compensation cost. See Note 13,
Stock-Based Compensation
, to the Consolidated Financial Statements for additional information.

Investments in auction-rate securities
We determine the fair value of our investments in auction-rate securities using a discounted cash flow model.
The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect our
inability to liquidate the securities. For available-for-sale auction-rate securities, if the calculated value is below the carrying amount of the securities, we then determine if the decline in value
is other-than-temporary. We consider various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, changes in underlying credit
ratings, forecasted recovery, our intent to sell or the likelihood that we would be required to sell the investment before its anticipated recovery in market value and the probability that the
scheduled cash payments will continue to be made. When we conclude that an other-than-temporary impairment has occurred, we assess whether we intend to sell
the security or if it is more likely than not that we will be required to sell the security before recovery. If either of these two conditions is met, we recognize a charge in earnings equal to the
entire difference between the security's amortized cost basis and its fair value. If we do not intend to sell a

security
and it is not more likely than not that we will be required to sell the security before recovery, the unrealized loss is separated into an amount representing the credit loss, which is
recognized in earnings, and the amount related to all other factors, which is recorded in accumulated other comprehensive loss.

Acquired intangible assets
When we acquire a business, a portion of the purchase price is typically allocated to identifiable intangible assets, such
as acquired technology and customer relationships. Fair value of these assets is determined primarily using the income approach, which requires us to project future cash flows and apply an appropriate
discount rate. We amortize intangible assets with finite lives over their expected useful lives. Our estimates are based upon assumptions believed to be reasonable but which are inherently uncertain
and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. Incorrect estimates could result in future impairment charges, and those charges
could be material to our results of operations.

Impairment of goodwill and other long-lived assets
We review long-lived assets which are held and used, including fixed assets and purchased
intangible assets, for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such evaluations compare the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset over its expected useful life and are significantly impacted by estimates of future prices and volumes for our products,
capital needs, economic trends and other factors which are inherently difficult to forecast. If the asset is considered to be impaired, we record an impairment charge equal to the amount by which the
carrying value of the asset exceeds its fair value determined by either a quoted market price, if any, or a value determined by utilizing a discounted cash flow technique.

We
test our goodwill for impairment annually as of the first day of our fourth fiscal quarter and in interim periods if certain events occur indicating that the carrying value of
goodwill may be impaired. The goodwill impairment test is a two-step process. The first step of the impairment analysis compares our fair value to our net book value. In determining fair value, the
accounting guidance allows for the use of several valuation methodologies, although it states quoted market prices are the best evidence of fair value. If the fair value is less than the net book
value, the second step of the analysis compares the
implied fair value of our goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, we recognize an impairment loss equal to that excess amount.

Income taxes
We are required to calculate income taxes in each of the jurisdictions in which we operate. This process involves calculating the actual
current tax liability together with assessing temporary differences in recognition of income (loss) for tax and accounting purposes. These differences result in deferred tax assets and liabilities,
which are included in our Consolidated Balance Sheet. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In
assessing the need for a valuation allowance, we are required to estimate the amount of expected future taxable income. Judgment is inherent in this process and differences between the estimated and
actual taxable income could result in a material impact on our Consolidated Financial Statements.

We
recognize liabilities for uncertain tax positions based on a two-step process. The first step requires us to determine whether the weight of available evidence indicates that the tax
position has met the threshold for recognition. Therefore, we must evaluate whether it is more likely than not that the position will be sustained on audit, including resolution of any related appeals
or litigation processes. The second step requires us to measure the tax benefit of the tax position taken, or expected to be taken, in an income tax return as the largest amount that is more than 50%
likely of being realized upon ultimate settlement. This measurement step is inherently complex and requires subjective estimations of such amounts to determine the probability of various possible
outcomes. We re-evaluate the uncertain tax positions each quarter based on factors including, but not limited to, changes in facts

or
circumstances, changes in tax law, expirations of statutes of limitation, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in
the recognition of a tax benefit or an additional charge to the tax provision in the period.

Although
we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of these matters will not be different
than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, it could have a material effect on our income tax
provision and net income in the period or periods for which that determination is made. We operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions. These audits
can involve complex issues which may require an extended period of time to resolve and could result in additional assessments of income tax. We believe adequate provisions for income taxes have been
made for all periods.

Recent Accounting Pronouncements

In November 2015, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2015-17,
Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes
. The amendments in this update require that deferred tax liabilities and assets
be classified as noncurrent in a classified statement of financial position. This ASU is effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period. We early adopted this ASU on a prospective basis in the
fourth quarter of fiscal 2015. Prior periods were not retrospectively adjusted.

In
September 2015, the FASB issued FASB ASU No. 2015-16,
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period
Adjustments.
The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period with a
corresponding adjustment to goodwill in the reporting period in which the adjustment amounts are determined. The effect on earnings of changes in depreciation, amortization or other income effects, if
any, as a result of the change to the provisional amounts will be recorded in the same period's financial statements, calculated as if the accounting had been completed at the acquisition date. This
ASU is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to
adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for financial statements that have not been issued. We early adopted this ASU
in the fourth quarter of fiscal 2015. The adoption did not have a material impact on our financial statements.

In
July 2015, the FASB issued FASB ASU No. 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory
. The amendments
in this update require inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The
amendments in this update should be applied prospectively with earlier application permitted. We do not expect that the adoption of this ASU will have a material impact on our financial statements.

In
April 2015, the FASB issued FASB ASU No. 2015-03,
InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of
Debt Issuance Costs
. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability. ASU 2015-03 is to be applied retrospectively and represents a change in accounting principle. In August 2015, the FASB issued FASB
ASU No. 2015-15,
InterestImputation of Interest (Subtopic 835-30): Presentation and Subsequent

Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements.
ASU 2015-15 clarified the presentation and subsequent measurement of debt issuance costs related
to line-of-credit arrangements. Such costs may be presented in the balance sheet as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether
there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 and ASU 2015-15 are effective for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. Earlier adoption is permitted for financial statements that have not been previously issued. We do not expect that the adoption of ASU 2015-03 and ASU 2015-15 will have a
material impact on our financial statements.

In
May 2014, the FASB issued FASB ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606),
which supersedes the revenue
recognition requirements in ASC 605,
Revenue Recognition
. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance
provides a five-step process to achieve that core principle. ASU 2014-09 requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about contracts with customers, significant judgments and changes in
judgments, and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued FASB ASU No. 2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date
, which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that reporting period, using one of two retrospective application methods. Early application is permitted only as of annual
reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are currently evaluating the effect that the adoption of ASU 2014-09
and ASU 2015-14 will have on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Income

Our investment portfolio includes cash, cash equivalents, short-term investments and long-term investments. Our main investment
objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio. Our interest income is sensitive to changes in the general level of U.S.
interest rates. Our investment portfolio holdings as of January 2, 2016 and January 3, 2015 yielded less than 100 basis points. A decline in yield to zero basis points on our investment
portfolio holdings as of January 2, 2016 and January 3, 2015 would decrease our annual interest income by approximately $0.9 million and $1.0 million, respectively. We
believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

Interest Expense

We are exposed to interest rate fluctuations in the normal course of our business, including through our Credit Facilities. The
interest payments on the Credit Facilities consist of a variable-rate of interest and an applicable margin. We have entered into an interest rate swap agreement with an original notional value of
$100 million that, effectively, converted the variable-rate interest payments to fixed-rate interest payments through July 2017.

We are exposed to foreign currency exchange rate risk primarily through assets and liabilities of our subsidiaries denominated in
currencies other than the U.S. dollar. Our foreign subsidiaries are considered to be extensions of the U.S. parent. The functional currency of the foreign subsidiaries is the U.S. dollar. Accordingly,
gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are recorded in other income (expense), net in the Consolidated Statements of Income. We use
foreign currency forward contracts to manage
exposure to foreign exchange risk. Gains and losses on foreign currency forward contracts are recognized in earnings in the same period as the remeasurement loss and gain of the related foreign
currency denominated asset or liability.

Investments in Auction-rate Securities

In fiscal 2008, auctions for many of our auction-rate securities failed because sell orders exceeded buy orders. As of
January 2, 2016, we held $8.0 million par value auction-rate securities, all of which have experienced failed auctions. The principal amounts associated with failed auctions are not
expected to be accessible until a successful auction occurs, the issuer redeems the securities, a buyer is found outside of the auction process or the underlying securities mature. We are unable to
predict if these funds will become available before their maturity dates. Additionally, if we determine that an other-than-temporary decline in the fair value of any of our available-for-sale
auction-rate securities has occurred, we may be required to adjust the carrying value of the investments through an impairment charge.

Item 8. Financial Statements and Supplementary Data

The Financial Statements and supplementary data required by this item are included in Part IV, Item 15 of this
Form 10-K and are presented beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
Exchange Act). Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of January 2, 2016 to provide
reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. Such disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed is accumulated and
communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosures. There was no change in our internal controls during the fiscal quarter ended
January 2, 2016 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control
system was designed to provide reasonable assurance to our

management
and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our
management assessed the effectiveness of our internal control over financial reporting as of January 2, 2016. In making this assessment, it used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal ControlIntegrated Framework
(2013 framework). Based on
our assessment we concluded that, as of January 2, 2016, our internal control over financial reporting is effective based on those criteria.

Certain information required by Part III is omitted from this report because we intend to file a definitive Proxy
Statement pursuant to Regulation 14A (the "Proxy Statement") no later than 120 days after the end of the fiscal year covered by this report, and certain information to be included
therein is incorporated herein by reference.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated by reference to the Proxy Statement under the sections captioned "Proposal One:
Election of Directors," "Executive Compensation," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Code of Ethics."

Item 11. Executive Compensation

The information under the caption "Executive Compensation" and "Proposal One: Election of Directors" appearing in the Proxy Statement,
is incorporated herein by reference.

All
other schedules have been omitted since the information required by the schedule is not applicable, or is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial Statements and notes thereto.

3.

Exhibits

The
exhibits listed on the accompanying index to exhibits immediately following the Consolidated Financial Statements are filed as part of, or hereby incorporated by reference into, this
Form 10-K.

Share Purchase Agreement, dated June 6, 2013, by and between Silicon Laboratories International Pte. Ltd. and Energy AS and Silicon Laboratories Inc. (filed as Exhibit 2.1 to the Form 8-K filed on
June 7, 2013).

2.2

*

Sale and Purchase Agreement dated January 30, 2015, by and between Silicon Laboratories International Pte. Ltd. and the holders of shares, options and capital loans in Bluegiga Technologies Oy (filed as
Exhibit 2.1 to the Form 8-K filed on February 4, 2015).

2.3

*

Agreement dated November 20, 2015, by and between the shareholders of Telegesis (UK) Limited and Silicon Laboratories UK Limited (filed as Exhibit 2.1 to the Form 8-K filed on November 23,
2015).

3.1

*

Form of Fourth Amended and Restated Certificate of Incorporation of Silicon Laboratories Inc. (filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (Securities and Exchange Commission
File No. 333-94853) (the "IPO Registration Statement")).

3.2

*

Third Amended and Restated Bylaws of Silicon Laboratories Inc. (filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on July 29, 2015).

4.1

*

Specimen certificate for shares of common stock (filed as Exhibit 4.1 to the IPO Registration Statement).

10.1

*

Form of Indemnification Agreement between Silicon Laboratories Inc. and each of its directors and executive officers (filed as Exhibit 10.1 to the IPO Registration Statement).

10.2

*

Credit Agreement, dated July 31, 2012, by and among Silicon Laboratories Inc., the subsidiaries of the borrower identified therein, Bank of America, N.A., Wells Fargo Bank, National Association, and Regions Bank
(filed as Exhibit 10.1 to the Form 8-K filed August 1, 2012).

10.3

*

Security and Pledge Agreement, dated July 31, 2012, by and among Silicon Laboratories Inc., with the other parties identified as "Obligors" (as defined therein) and such other parties that may become Obligors
thereunder after the date thereof, and Bank of America, N.A (filed as Exhibit 10.2 to the Form 8-K filed August 1, 2012).

10.4

*

Silicon Laboratories Inc. 2009 Stock Incentive Plan, as amended and restated on April 15, 2014 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 16,
2014).

10.5

*

Silicon Laboratories Inc. 2009 Employee Stock Purchase Plan, as amended and restated on April 15, 2014 (filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on April 16,
2014).

10.6

*

Form of Restricted Stock Units Grant Notice and Global Restricted Stock Units Award Agreement under Registrant's 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.3 to the Registrant's Current
Report on Form 8-K filed on April 16, 2014).

10.7

*

Form of Market Stock Units Grant Notice and Global Market Stock Units Award Agreement under Registrant's 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.4 to the Registrant's Current Report on
Form 8-K filed on April 16, 2014).

Form of Stock Option Grant Notice and Global Stock Option Award Agreement under Registrant's 2009 Stock Incentive Plan, as amended and restated (filed as Exhibit 10.5 to the Registrant's Current Report on
Form 8-K filed on April 16, 2014).

First Amendment to Credit Agreement, dated July 24, 2015, by and among Silicon Laboratories Inc., the subsidiaries of the borrower identified therein, Wells Fargo Bank, National Association, Citibank, N.A.,
Regions Bank, Bank of America, N.A. and the lenders party thereto (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on July 29, 2015).

10.11

*+

Transition Agreement between Kurt Hoff and Silicon Laboratories Inc. dated August 24, 2015 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on October 30,
2015).

10.12

*+

Silicon Laboratories Inc. 2016 Bonus Plan (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on January 28, 2016).

21

Subsidiaries of the Registrant.

23.1

Consent of Independent Registered Public Accounting Firm.

24

Power of Attorney (included on signature page to this Form 10-K).

31.1

Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification as required by Section 906 of the Sarbanes-Oxley Act of 2002.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, in Austin, Texas, on February 5, 2016.

SILICON LABORATORIES INC.

By:

/s/ G. TYSON TUTTLE
G. Tyson Tuttle
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints G. Tyson Tuttle and John C.
Hollister and each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments to this annual report on Form 10-K and other documents in connection herewith and therewith, and to file the same, with all exhibits thereto,
with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection herewith and therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated:

We have audited Silicon Laboratories Inc.'s internal control over financial reporting as of January 2, 2016, based on
criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Silicon
Laboratories Inc.'s
management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our
audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Silicon Laboratories Inc. maintained, in all material respects, effective internal control over financial reporting as of January 2, 2016, based on the COSO
criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Silicon
Laboratories Inc. as of January 2, 2016 and January 3, 2015, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash
flows for each of the three fiscal years in the period ended January 2, 2016 of Silicon Laboratories Inc. and our report dated February 5, 2016 expressed an unqualified opinion
thereon.

We have audited the accompanying consolidated balance sheets of Silicon Laboratories Inc. as of January 2, 2016 and
January 3, 2015, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the three fiscal years in the period ended
January 2, 2016. Our audits also included the financial statement
schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Silicon Laboratories Inc. at
January 2, 2016 and January 3, 2015, and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended January 2, 2016, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth therein.

As
discussed in Note 2 to the consolidated financial statements, the Company changed its method for classifying deferred tax assets and liabilities effective January 2,
2016.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Silicon Laboratories Inc.'s internal control over
financial reporting as of January 2, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 5, 2016 expressed an unqualified opinion thereon.

Silicon Laboratories Inc. (the "Company"), a Delaware corporation, is a provider of silicon, software and solutions for the Internet of Things (IoT), Internet infrastructure,
industrial control, consumer and automotive markets. Within the semiconductor industry, the Company is known as a "fabless" company meaning that the integrated circuits (ICs) incorporated in its
products are manufactured by third-party foundry semiconductor companies.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31.
Fiscal 2015 had 52 weeks and ended on January 2, 2016. Fiscal 2014 had 53 weeks with the extra week occurring in the fourth quarter of the year and ended on January 3,
2015. Fiscal 2013 had 52-weeks and ended on December 28, 2013. The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency Transactions

The Company's foreign subsidiaries are considered to be extensions of the U.S. Company. The functional currency of the foreign
subsidiaries is the U.S. dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are included in other income (expense), net in
the Consolidated Statements of Income.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are
those related to inventories, stock-based compensation, investments in auction-rate securities, acquired intangible assets, goodwill, long-lived assets and income taxes. Actual results could differ
from those estimates, and such differences could be material to the financial statements.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to current year presentation.

Fair Value of Financial Instruments

The fair values of the Company's financial instruments are recorded using a hierarchal disclosure framework based upon the level of
subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below:

Level 1Inputs
are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2Inputs
are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3Inputs
are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company's own
data.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits, money market funds and investments in debt securities with original maturities of
ninety days or less when purchased.

Investments

The Company's investments typically have original maturities greater than ninety days as of the date of purchase and are classified as
either available-for-sale or trading securities. Investments in available-for-sale securities are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of
accumulated other comprehensive loss in the Consolidated Balance Sheet. Investments in trading securities are reported at fair value, with both realized and unrealized gains and losses recorded in
other income (expense), net in the Consolidated Statement of Income. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations
(including those with contractual maturities greater than one year from the date of purchase) are classified as short-term.

The
Company reviews its available-for-sale investments as of the end of each reporting period for other-than-temporary declines in fair value based on the specific identification method.
The Company considers various factors in determining whether an impairment is other-than-temporary, including the severity and duration of the impairment, changes in underlying credit ratings,
forecasted recovery, its intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash
payments will continue to be made. When the Company concludes that an other-than-temporary impairment has occurred, the Company assesses whether it intends to sell the security or if it is more likely
than not that it will be required to sell the security before recovery. If either of these two conditions is met, the Company recognizes a charge in earnings equal to the entire difference between the
security's amortized cost basis and its fair value. If the Company does not intend to sell a security and it is not more likely than not that it will be required to sell the security before recovery,
the unrealized loss is separated into an amount representing the credit loss, which is recognized in earnings, and the amount related to all other factors, which is recorded in accumulated other
comprehensive loss.

In
addition, the Company has made equity investments in non-publicly traded companies that it accounts for under the cost method. The Company periodically reviews these investments for
other-than-temporary declines in fair value based on the specific identification method and writes down investments to their fair values when it determines that an other-than-temporary decline has
occurred.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage certain exposures to the variability of interest rates and foreign currency
exchange rates. The Company's objective is to offset increases

and
decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. The Company does not use derivative contracts for
speculative or trading purposes. The Company recognizes derivatives, on a gross basis, in the Consolidated Balance Sheet at fair value. Cash flows from derivatives are classified according to the
nature of the cash receipt or payment in the Consolidated Statement of Cash Flows.

The
Company uses interest rate swap agreements to manage exposure to interest rate risks. The swap agreements are designated and qualify as cash flow hedges. The effective portion of the
gain or loss on the interest rate swaps is recorded in accumulated other comprehensive loss as a separate component of stockholders' equity and is subsequently recognized as interest expense in the
Consolidated Statement of Income when the hedged exposure affects earnings.

The
Company uses foreign currency forward contracts to manage exposure to foreign exchange risk. These instruments are used to reduce the earnings impact that exchange rate fluctuations
have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in other income (expense), net in the Consolidated Statement of
Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to its foreign currency
derivative instruments.

Inventories

Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. The Company writes down the
carrying value of inventory to net realizable value for estimated obsolescence or unmarketable inventory based upon assumptions about the age of
inventory, future demand and market conditions. Inventory impairment charges establish a new cost basis for inventory and charges are not subsequently reversed to income even if circumstances later
suggest that increased carrying amounts are recoverable.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method
over the useful lives of the assets ranging from three to seven years. Leasehold improvements are depreciated over the contractual lease period or their useful life, whichever is shorter.

In
fiscal 2012, the Company purchased the facilities it had previously leased for its headquarters in Austin, Texas. The buildings are located on land which is leased through 2099 from a
third party. The rents for these ground leases were prepaid for the term of the leases by the previous lessee. The buildings and leasehold interest in ground leases are being depreciated on a
straight-line basis over their estimated useful lives of 40 years and 86 years, respectively.

Business Combinations

The Company records business combinations using the acquisition method of accounting and, accordingly, allocates the fair value of
purchase consideration to the assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of the fair value of purchase

consideration
over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The results of operations of the businesses acquired are included in the Company's
consolidated results of operations beginning on the date of the acquisition.

Long-Lived Assets

Purchased intangible assets are stated at cost, net of accumulated amortization, and are amortized using the straight-line method over
their estimated useful lives, ranging from one to twelve years. Fair values are determined primarily using the income approach, in which the Company projects future expected cash flows and applies an
appropriate discount rate.

Long-lived
assets "held and used" by the Company are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When
such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against
their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets and is recorded in the period in which the determination was
made.

The
carrying value of goodwill is reviewed at least annually by the Company for possible impairment. The goodwill impairment test is a two-step process. The first step of the impairment
analysis compares the fair value of the reporting unit to the net book value of the reporting unit. In determining fair value, several valuation methodologies are allowed, although quoted market
prices are the best evidence of fair value. If the results of the first step demonstrate that the net book value is greater than the fair value, the Company must proceed to step two of the analysis.
Step two of the analysis compares the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal
to that excess. The Company tests goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if events occur that would indicate that the carrying value
of goodwill may be impaired.

Revenue Recognition

Revenues are generated predominately by sales of the Company's products. The Company recognizes revenue when all of the following
criteria are met: 1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable, and
4) collectibility is reasonably assured. Generally, revenue from product sales to direct customers and contract manufacturers is recognized upon shipment.

A
portion of the Company's sales are made to distributors under agreements allowing certain rights of return and price protection related to the final selling price to the end customers.
Accordingly, the Company defers revenue and cost of revenue on such sales until the distributors sell the product to the
end customers. The net balance of deferred revenue less deferred cost of revenue associated with inventory shipped to a distributor but not yet sold to an end customer is recorded in the deferred
income on shipments to distributors liability on the Consolidated Balance Sheet. Such net deferred income balance reflects the Company's estimate of the impact of rights of return and price
protection.

A
small portion of the Company's revenues is derived from the sale of patents. The above revenue recognition criteria for patent sales are generally met upon the execution of the patent
sale agreement.

Shipping and handling costs are classified as a component of cost of revenues in the Consolidated Statements of Income.

Stock-Based Compensation

The Company has stock-based compensation plans, which are more fully described in Note 13,
Stock-Based
Compensation
. The Company accounts for those plans using a fair-value method and recognizes the expense in its Consolidated Statement of Income.

Research and Development

Research and development costs are expensed as incurred. Research and development expense consists primarily of personnel-related
expenses, including stock-based compensation, as well as new product masks, external consulting and services costs, equipment tooling,
equipment depreciation, amortization of intangible assets, and an allocated portion of our occupancy costs. Assets purchased to support the Company's ongoing research and development activities are
capitalized when related to products which have achieved technological feasibility or have an alternative future use, and are amortized over their estimated useful lives.

Advertising

Advertising costs are expensed as incurred. Advertising expenses were $1.8 million, $1.7 million and $2.0 million
in fiscal 2015, 2014 and 2013, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax asset and liability account balances
are determined based on differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax laws and related rates that will be in effect
when the differences are expected to reverse. These differences result in deferred tax assets and liabilities, which are included in the Company's Consolidated Balance Sheet. The Company then assesses
the likelihood that the deferred tax assets will be realized. A valuation allowance is established against deferred tax assets to the extent the Company believes that it is more likely than not that
the deferred tax assets will not be realized, taking into consideration the level of historical taxable income and projections for future taxable income over the periods in which the temporary
differences are deductible.

Uncertain
tax positions must meet a more-likely-than-not threshold to be recognized in the financial statements and the tax benefits recognized are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon final settlement. See Note 17,
Income Taxes
, for additional information.

Deferred Taxes
. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This
ASU is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted as of
the beginning of an interim or annual reporting period. The Company early adopted this ASU on a prospective basis in the fourth quarter of fiscal 2015. Prior periods were not retrospectively adjusted.

In
September 2015, the FASB issued FASB ASU No. 2015-16,
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period
Adjustments.
The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period with a
corresponding adjustment to goodwill in the reporting period in which the adjustment amounts are determined. The effect on earnings of changes in depreciation, amortization or other income effects, if
any, as a result of the change to the provisional amounts will be recorded in the same period's financial statements, calculated as if the accounting had been completed at the acquisition date. This
ASU is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to
adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for financial statements that have not been issued. The Company early adopted
this ASU in the fourth quarter of fiscal 2015. The adoption did not have a material impact on its financial statements.

In
July 2015, the FASB issued FASB ASU No. 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory
. The amendments
in this update require inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The
amendments in this update should be applied prospectively with earlier application permitted. The Company does not expect that the adoption of this ASU will have a material impact on its financial
statements.

In
April 2015, the FASB issued FASB ASU No. 2015-03,
InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of
Debt Issuance Costs
. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability. ASU 2015-03 is to be applied retrospectively and represents a change in accounting principle. In August 2015, the FASB issued FASB ASU
No. 2015-15,
InterestImputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit
Arrangements.
ASU 2015-15 clarified the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. Such costs may be presented in
the balance sheet as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit
arrangement. ASU 2015-03 and ASU 2015-15 are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Earlier adoption is permitted for
financial statements that have not been previously issued. The Company does not expect that the adoption of ASU 2015-03 and ASU 2015-15 will have a material impact on its financial statements.

In
May 2014, the FASB issued FASB ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, which supersedes the revenue
recognition requirements in ASC 605,
Revenue Recognition
. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance
provides a five-step process to achieve that core principle. ASU 2014-09 requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue
and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about contracts with customers, significant judgments and changes in
judgments, and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued FASB ASU No. 2015-14,
Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date
, which deferred the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods
beginning after December 15, 2017, including interim periods within that reporting period, using one of two retrospective application methods. Early application is permitted only as of annual
reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the effect that the adoption of ASU
2014-09 and ASU 2015-14 will have on its financial statements.

3. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Year Ended

January 2,
2016

January 3,
2015

December 28,
2013

Net income

$

29,586

$

38,021

$

49,819

​

​

​

​

​

​

​

​

​

​

​

Shares used in computing basic earnings per share

42,309

42,970

42,715

Effect of dilutive securities:

Stock options and other stock-based awards

636

823

822

​

​

​

​

​

​

​

​

​

​

​

Shares used in computing diluted earnings per share

42,945

43,793

43,537

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Earnings per share:

Basic

$

0.70

$

0.88

$

1.17

Diluted

$

0.69

$

0.87

$

1.14

For
fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013, approximately 0.1 million, 0.1 million and 0.4 million shares,
respectively, were not included in the diluted earnings per share calculation since the shares were anti-dilutive.

The Company's cash equivalents and short-term investments as of January 2, 2016 consisted of municipal bonds, money market funds, commercial paper, certificates of deposit,
variable-rate demand notes, U.S. government agency, international government bonds and corporate bonds. The Company's long-term investments consisted of auction-rate securities. In fiscal 2008,
auctions for many of the Company's auction-rate securities failed because sell orders exceeded buy orders. As of January 2, 2016, the Company held $8.0 million par value auction-rate
securities, all of which have experienced failed auctions. The underlying assets of the securities consisted of student loans and municipal bonds, of which $6.0 million were guaranteed by the
U.S. government and the remaining $2.0 million were privately insured. As of January 2, 2016, $6.0 million of the auction-rate securities had credit ratings of AA and
$2.0 million had a credit rating of A. These securities have contractual maturity dates ranging from 2033 to 2046 at January 2, 2016. The Company is receiving the underlying cash flows
on all of its auction-rate securities. The principal amounts associated with failed auctions are not expected to be accessible until a successful auction occurs, the issuer redeems the securities, a
buyer is found outside of the auction process or the underlying securities mature. The Company is unable to predict if these funds will become available before their maturity dates.

The
Company does not expect to need access to the capital represented by any of its auction-rate securities prior to their maturities. The Company does not intend to sell, and believes
it is not more likely than not that it will be required to sell, its auction-rate securities before their anticipated recovery in market value or final settlement at the underlying par value. The
Company believes that the credit ratings and credit support of the security issuers indicate that they have the ability to settle the securities at par value. As such, the Company has determined that
no other-than-temporary impairment losses existed as of January 2, 2016.